Banking on Africa ’s social and economic impact

A report by Dr René Kim and Professor Ethan B Kapstein Contents

1 Introduction 4 1.1 Methodology 4 About the authors 1.2 Non-quantifiable impact 5 1.3 Scope 5 René Kim is founding Ethan B Kapstein is 2 Africa’s growth story 6 partner of Steward currently a Visiting Fellow 2.1 Reduced reliance on resources 8 Redqueen. He has worked at the Centre for Global 2.2 Economic fundamentals 8 with many multinational Development in Washington 2.3 Urbanisation, productivity and the growing middle class 9 2.4 The growing importance of trade 9 companies and private DC. Previously he was the 2.5 Remaining challenges 10 equity funds in both Chair of Political Economics 2.6 The role of the financial sector 10 developed and emerging at INSEAD and held positions markets. Previously, he at Georgetown University, 3 Standard Chartered in Africa 12 worked for the Boston Harvard University, the 3.1 Strong growth in Africa 13 3.2 Wholesale banking 13 Consulting Group in University of Minnesota, 3.3 Consumer banking 13 Amsterdam and as an and the Organisation for 3.4 Helping small businesses 13 academic at the Economic Cooperation and 3.5 Deep local knowledge 13 Massachusetts Institute Development. A former 3.6 Leveraging international knowledge and finance 14 of Technology. He holds a international banker and 3.7 Spurring innovation 15 3.8 Acting responsibly 15 cum laude PhD in Hydrology naval officer, Professor 3.9 Opportunities for the future 15 and Meteorology and is the Kapstein serves as an author of many academic economic and strategy 4 Standard Chartered’s quantitative impact 16 articles. consultant to government 4.1 Standard Chartered’s presence in Sub-Saharan Africa 17 agencies and many of the 4.2 Standard Chartered’s impact on growth and jobs in Sub-Saharan Africa 17 4.3 Contribution by economic sector 19 world’s leading multinational 4.4 Contribution by customer segment 23 corporations. His latest 4.5 Contribution to trade 24 books are Economic Justice in an Unfair World; The Fate 5 Standard Chartered’s other contributions – a qualitative assessment 26 5.1 Risk management: size, derivatives and hedging 27 of Young Democracies; and 5.2 Financial innovation 27 AIDS Drugs for All. 5.3 Deepening of capital markets 27 5.4 Supporting the development of Islamic banking 28 5.5 Governance and business practices 28 The authors were assisted by Hedda Eggeling, Teodora 5.6 Community investment 29 Nenova and Tias van Moorsel of Steward Redqueen, 5.7 External recognition 31 a strategy consultancy firm represented in Amsterdam, 6 Standard Chartered’s impact on 32 Barcelona and New York. 6.1 The Nigerian economy 33 6.2 Nigeria’s financial sector 36 6.3 Standard Chartered’s activities in Nigeria 36 6.4 Impact on growth and jobs in Nigeria 37 6.5 Impact on trade 42 7 Standard Chartered’s impact on Zambia 44 7.1 The Zambian economy 45 7.2 Zambia’s financial sector 48 7.3 Standard Chartered’s activities in Zambia 48 7.4 Impact on growth and jobs in Zambia 48 7.5 Impact on trade 53 8 Standard Chartered’s impact on 54 8.1 The Kenyan economy 55 8.2 Kenya’s financial sector 58 8.3 Standard Chartered’s activities in Kenya 58 8.4 Impact on growth and jobs in Kenya 59 8.5 Impact on trade 64 9 Standard Chartered’s impact on 66 9.1 The Ghanaian economy 67 9.2 Ghana’s financial sector 70 9.3 Standard Chartered’s activities in Ghana 70 9.4 Impact on growth and jobs in Ghana 70 9.5 Impact on trade 74 10 Conclusion 76 10.1 Conclusion 77 10.2 Recommendations for Standard Chartered 78 10.3 Remarks for governments 79 Appendix 80 A.1 Model description 80 A.2 Limitations of the approach 81 Unless another currency is specified the word ‘dollar’ or A.3 Comparison with Ghana 2009 impact study 82 A.4 Overview of sectors 84 symbol ‘$’ in this document means US dollar. Foreword by Group Chief Executive Standard Chartered

All eyes are on Africa. Over the past decade, the continent we committed to financing $2 billion in African energy has consistently grown faster than the world as a whole. projects, as part of the five-year Power Africa initiative. And unlike previous resource-driven booms, this time Yet, our role is by no means limited to provision of finance. Africa’s success is built on foundations that should be We support job creation in a myriad of other ways – by sustainable for the long term. training local talent, or by introducing innovations that make A new and confident African middle class is emerging, and it easier for people and businesses to access finance, or by trade is expanding rapidly, notably with Asia. Meanwhile, helping to develop financial markets and infrastructure that Africa is leapfrogging old technologies and embracing the underpin economic activity. In the past few years, we have digital revolution, leading the world in innovations such as advised the governments of Nigeria, Ghana and Senegal Peter Sands mobile payments. on their sovereign credit ratings, and worked with Bank of Ghana on the country’s national payments strategy. Across Africa, the opportunities are compelling. Yet, it would be wrong to deny the challenges – social, political This is our fourth and most comprehensive impact study and economic – that face the continent. to date, following country-specific reports on Ghana, Indonesia and Bangladesh. As before, we are grateful to Despite Africa’s strong performance, poverty and income Professor Kapstein and Dr René Kim for providing their inequality continue to be significant challenges. Job creation valuable insights. We will use these to guide us as we is not keeping pace with the continent’s rapidly growing continue to evolve our business in Africa. population. Lack of investment in infrastructure has left much of Sub-Saharan Africa with an insufficient and unreliable power supply, hampering long-term growth. We are banking on Africa, enthusiastic Jobs are essential to eradicating poverty and fostering real development in economies. And banking plays an important about the continent’s potential, and role in job creation. fuel employment by providing credit and other that help businesses set committed to being part of its future up, trade and expand – and by working with governments to remove barriers to economic activity. The study confirms, once again, that small and medium- We commissioned this independent study to measure the sized enterprises (SMEs) are powerful job creators. We will role of Standard Chartered, and of banking more broadly, in invest more time in looking at how we can work with our generating trade, growth and jobs across Africa, and to find large corporate clients to support more SMEs through the out what we can do better. supply chain. This year, we committed under the Clinton Global Initiative to expand our SME training programme In many ways, and for a long time, Africa has been home for to 5,000 SMEs, many of them in Africa. Standard Chartered. We opened our first branch on the continent more than 150 years ago. We are investing for We will also explore how we can help create greater the long term in our African franchises, using our knowledge inter-linkages between different economic sectors, from of different local economies, our deep and long-standing farming to manufacturing and distribution; it is through relationships and our global network, to support the people these crucial ‘transmission channels’ that banking translates and businesses driving trade, investment and the creation of into real development impact. wealth across the continent. We also invest heavily in the Done well, banking is the fuel on which prosperous and development and training of our people – over 98 per cent healthy economies depend. Articulating what banks do and of our employees in the region are African. why it matters, is vital in rebuilding the trust between banks By measuring ripple effects through the economy, this and society that was lost in the wake of the global financial study shows that our operations and financing support crisis and, six years on, has yet to be fully restored. some 1.9 million jobs in 13 of the 15 markets where we In all of our markets, Standard Chartered is committed to operate in Sub-Saharan Africa. The bulk of these jobs are in supporting our clients and customers, creating value for our advanced, high value-added sectors – the fast-growing shareholders and making a broader contribution to society. manufacturing and service industries that are changing the We are banking on Africa, enthusiastic about the continent’s face of Africa’s economies. potential, and committed to being part of its future. The study also highlights how we help to remove barriers to job creation, by using our relationships and capabilities in Peter Sands Asia, Africa and the Middle East to mobilise offshore capital Group Chief Executive for crucial infrastructure investment. Last year, for example, Standard Chartered

The Social and Economic Impact of Standard Chartered in Africa 1 Executive summary

Standard Chartered Bank has been operating in Africa The report also makes a qualitative assessment of other ways for more than 150 years and is present in 15 African in which Standard Chartered contributes to local communities countries and active in 36 countries across the continent. in Africa, including its financial innovation, risk management Currently it serves more than one million retail tools, business practices and community investments. customers, approximately 100,000 small and medium- The main findings are: sized enterprises, and has well over 6,000 corporate client relationships in Sub-Saharan Africa, providing them • Total exposure: As of 31 December 2012, Standard with a comprehensive range of wholesale and consumer Chartered provided financing to businesses, consumers banking services. and government agencies within Sub-Saharan Africa 1 The bank contributes to Sub-Saharan Africa’s development worth $10.6 billion . This includes $3.5 billion of in a number of ways. As well as channelling the most international finance. efficient use of local savings and investment, Standard GDP contribution: Through its lending, Standard Chartered Chartered plays a vital role in financing cross-border trade • is directly and indirectly associated with $10.7 billion of and investment, while bringing much-needed innovation in value added in Sub-Saharan Africa. This equals 1.2 per cent financial services. of the region’s GDP and 1.8 per cent of the combined GDP But what is the wider impact of Standard Chartered’s business of the countries in which Standard Chartered is present. on Africa’s economies? How has the bank contributed to employment, personal incomes, business profits, and tax • Households: $6 billion of the value added associated generation in the countries where it operates and across the with Standard Chartered comes in the form of salaries to region as a whole? With a number of countries in Sub-Saharan households in Sub-Saharan Africa. Africa overcoming significant challenges to enjoy strong • Taxes: Standard Chartered supports some $1.8 billion economic growth in recent years, how can Standard Chartered of tax payments to governments in Sub-Saharan Africa, help the economies in Africa remain on a positive trajectory equivalent to 1.1 per cent of total receipts of in the future? governments in the region. Out of this, $1.3 billion is paid This report draws on quantitative and qualitative assessments directly by Standard Chartered and its clients. to answer these questions, examining the bank’s direct and indirect impact in 13 of its 15 Sub-Saharan Africa markets • Employment: Through its lending, Standard Chartered (excluding and Mauritius). In particular, the report directly and indirectly supports some 1.9 million jobs in focuses on four countries – Nigeria, Zambia, Kenya and Ghana Sub-Saharan Africa. This is equivalent to about 0.6 per (markets representing over half Standard Chartered’s African cent of the region’s total workforce and 1.2 per cent of revenues). It assesses the impact of the bank’s operations in the workforce in the countries where Standard Chartered terms of economic value added and employment supported. is present. In particular, it assesses Standard Chartered’s impact on Africa’s trade, deploying its global network spanning 68 markets, and as the only international bank with a major presence across both Africa and Asia.

1 This excludes exposure in South Africa and Mauritius and includes $2 billion of trade contingents

2 The Social and Economic Impact of Standard Chartered in Africa • Trade: Through its general and trade finance, Standard • Human capital: The bank attracts and develops some Chartered supports Sub-Saharan trade worth $7.2 billion. of the best talent in Africa. Over 98 per cent of its The bank therefore contributes to 1.2 per cent of Sub- employees are African. Thirteen of the bank’s 15 country Saharan Africa’s total international trade. It supports 1.7 per Chief Executive Officers are African. In addition, more cent of total imports to the region and 0.8 per cent of its than 300 African staff work outside their home market exports. For the countries in Sub-Saharan Africa where in the bank’s global network, helping to transfer Standard Chartered is present this amounts to 1.6 per cent international best practice into and out of Africa. of total trade, 2.2 per cent of imports and 1.0 per cent Standard Chartered also helps to strengthen human of exports. capital in the financial sector. Currently six Kenyan banks, four Tanzanian banks and two Ghanaian banks have CEOs As a leading • Capital mobilisation and convening power: who are ex-Standard Chartered employees. international bank, Standard Chartered can channel capital from the rest of the world into Africa (historically the world’s • Innovation: The bank has used its expertise to introduce most capital-constrained region). The bank can therefore new banking technology and advanced financial structures finance deals that are too large for local banks, partly to the region. For example, it was the first bank to through international finance, or convene other banks in introduce interest rate swaps, and currency and interest syndicated financing for major projects. In 2012, Standard rate hedging to Ghana. Standard Chartered also introduced Chartered’s international finance2 to the region amounted ATMs in Uganda and Kenya, and recently launched the to $3.5 billion. first-ever digital branches in Kenya and Ghana. • Underwriting: In addition to its $10.6 billion exposure, in • Business practices: Standard Chartered acts as an 2012 Standard Chartered underwrote financial transactions important catalyst in improving the corporate governance for clients in Sub-Saharan Africa, thereby mitigating their standards of its clients. financing risk. For the deals outstanding as per year-end In conclusion, Standard Chartered has a significant impact 2012, Standard Chartered has underwritten an additional in Sub-Saharan Africa, consistent with its standing as one amount of $1.8 billion. The economic impact associated of the oldest and largest banks in many of the countries with this underwriting is $1.6 billion of value added and where it is present. The report illustrates that the banking 206,000 jobs. Not all this impact is attributable to Standard sector plays a key role in the development and growth of Chartered because syndicate partners assume part of the national economies. International banks are particularly credit risk. significant because of their ability to mobilise international capital and to finance global trade, both of which are critical Market deepening: In many of the countries where it • to sustained growth. Since developing nations tend to is present, Standard Chartered is an important trader in struggle to finance investments with domestic savings and secondary markets, actively deepening local capital consequently rely on international markets as a source of markets. This in return enables better pricing of financial additional finance, banks such as Standard Chartered help instruments and thus better allocation of capital in to fill this gap as they have access to global markets in these economies. addition to mobilising local capital. The report highlights a • Risk management: In addition to its international capital number of ways in which the bank could deepen its impact base, the bank uses its international human capital and in Sub-Saharan Africa, including by further increasing its expertise to develop complex financial products that engagement with small and medium-sized enterprises diversify risks. (SMEs), and by catalysing the region’s economic complexity, for example through greater access to supply chain finance. 2 This includes international general finance (assets backed finance, general lending and leverage finance) as well as international trade finance (trade contingents, structured trade finance, export finance, general trade finance). In addition, the study covers $120 million private equity finance

The Social and Economic Impact of Standard Chartered in Africa 3

1/Introduction

In addition to providing an aggregate view of Standard Chartered Group in Africa, the report focuses on several key markets, including Kenya, Nigeria, Zambia and Ghana. The bank’s differing strategies in these economies – all different in structure and complexity – demonstrates how Standard Chartered adapts to local conditions. The report also looks at Standard Chartered’s role in the trade corridors that connect Africa with other regions across the world, as well as trade between African countries. Standard Chartered and the institutions that later became part of Standard Chartered have operated in many African nations for more than 150 years. In some countries they also served as the local . This report shows how the bank has accompanied Africa during its recent period of profound economic transformation. In particular, this report focuses on Standard Chartered’s role in financing trade and investment. The bank has been a significant financial player in Africa, not only due to its wholesale and retail lending products and its trade finance, but also thanks to the innovations it has introduced into financial markets. What is Standard Chartered’s impact on Africa’s economy? How many Africans depend on jobs created through the bank’s activities? What is the wider importance of Standard Chartered to Africa’s development, and how can it deepen its participation? These are the questions addressed in this report. Africa is at a crucial stage where access to finance remains a Standard Chartered Over the past decade, Africa has been one of the fastest- vital issue. As the continent continues to grow and develop, finances growing regions of the world – which still managed to post Standard Chartered can expect to extend its reach to a broader manufacturing, a positive growth over the crisis period that began in 2008 range of clients. sector that and has reverberated around the globe. generates significant value added per job Since the start of the last decade, much of its growth has been driven by world demand for the continent’s 1.1 Methodology commodities, but since the crisis Africa’s growth is being led increasingly by domestic consumption. This report draws on a combination of qualitative and quantitative assessments. The quantifiable elements of the A burgeoning middle class, increasing urbanisation and study are based upon ‘input-output’ modelling, developed booming manufacturing and service sectors have driven by Wassily Leontief, a Nobel Prize-winning economist. It economic growth, meaning that Africa now has a better provides a blueprint of an economy, showing how each foundation for sustained success with a reduced sector depends upon another. dependency on natural resources and global demand. For example, the agricultural sector in a country provides an Sustainable growth requires sustainable finance. This report input into the food-processing sector, which in turn provides sets out to assess the role of Standard Chartered in an input into the country’s transportation and retail channels. providing this finance to Sub-Saharan Africa. The report The final output, for example a box of cereal or loaf of bread, follows similar studies carried out in 2012 in Bangladesh, is the result of all of these economic inputs. and in 2010 in Ghana and Indonesia. With these series of reports, Standard Chartered aims at quantifying its social The input-output model aims to measure these relationships and economic impact on the economies in which it operates. and, in the case of Standard Chartered, it attempts to capture the extent to which the bank’s financing helps clients to increase both production and domestic and foreign sales.

4 The Social and Economic Impact of Standard Chartered in Africa Introduction

5 The Social and Economic Impact of Standard Chartered in Africa best available, it is important not to be overly assertive be overly when to not it is important available, best the results. interpreting to it comes Chartered Standard from received we financing data The local the to reported was with what agreement in complete are is The same Banks and thus highly reliable. Central various The data finance. international Chartered’s Standard true for trade by the bank’s flows supported the trade regarding be not flows could trade Where accurate. less are finance Standard opinions from used expert have we explicitly traced must flow results trade The supported employees. Chartered with caution. be interpreted therefore 1.2 Non-quantifiable impact quantifyWhile the methodology allows us to above the it is important to Africa, impacteconomic on Sub-Saharan impact, aspects the bank’s other to are that there remember These aspects are in this way. be measured which cannot and social economic of the bank’s important ingredients impact. of non-quantifiable aspects Examples clear that have innovation risk management practices, impactseconomic are and markets of financial services, deepening of capital its sustainable Through of human resources. development its harness aims to Chartered Standard banking strategy, challenges. These aspects societal help address to resources 5. in Chapter detail in some discussed are 1.3 Scope financial Chartered’s of Standard is a snapshot The study activities otherwise 2012 unless based on the financial year of the development track and as such does not stated, benchmark time. It does not over in Africa Chartered Standard in Africa. operating financial institutions other the bank against including on the modelling approach information more For the appendix. to refer please and limitations, assumptions including this introduction. chapters ten over extends This report Africa’s profiling study, the for the context and 3 set 2 Chapters within it. role Chartered’s Standard and economy quantify impact chapters the socio-economic The following and Ghana. Zambia on Nigeria, Kenya, Chartered of Standard and investment, is on trade some of the report While the focus in the economy role Chartered’s analysis of Standard qualitative has also been included. showing studies, a number of client case contains The report behind people and businesses impact on the real the bank’s the numbers.

The model’s main results are value added, i.e. the sum of value are results main The model’s and employment. taxes, and salaries, profits and indirect the direct both The model helps us examine those that are effects financing. Direct of the bank’s effects the but the model also considers the borrower, benefit just impact of the financing. indirect, and leveraged induced impact,The indirect employment, for which is only quantified financing on the borrower’s of the the effect captures impact suppliers. The induced is suppliers, and the suppliers’ that they the income re-spending of individuals the effect and its Chartered Standard for by working earned have as suppliers and their suppliers. The leveraged clients as well borrow able to impact on households that are is the effect increase to earned they have money income by using the their household expenditure. perfect.Input-output modelling is not The model allows us but it does the economy, money as it flows through trace to some limitations. have which effects, look at crowding-out The model does not is at the growth client’s Chartered if a Standard occur example, happen, for This could of a competitor. expense go to hotel another causes hotel of a the expansion where overestimate the model would In this case, out of business. by simply expansion impactthe economic of the hotel’s while disregarding effect the positive account into taking of a much less out is generally one. Crowding the negative more have to as they tend economies in emerging problem than in more companies of competing numbers limited Nevertheless, when lending takes countries. developed be the can of sectors, which a couple or just in one place occur. out can crowding Africa, in Sub-Saharan case look at price is that the model does not limitation Another because constraining overly this is not However, differences. of the small slice a relatively finances Chartered Standard the price of GDP and than 5 per cent less or economy be small. to likely it are to changes related input-output method the to important limitation The third – are is that firms in the same sector – say manufacturing have We structures. production identical have to assumed this by looking at the actual counter to attempted and the output of Standard the capital between relationship clients. Chartered used. The we about the data points are The final two input-output modelling are used for data macro-economic at the (available Bank statistics based on national and World some are acknowledge that there end of 2012). We available and data statistics to relating in accuracy limitations be the to this data consider while we Therefore, on Africa. 2/Africa’s growth story

The opportunities in Africa are vast. By 2035 the continent will have the world’s largest workforce

, home to a young, fast growing and innovative workforce

6 The Social and Economic Impact of Standard Chartered in Africa Africa’s growth story

60% arable of the world’s land is held in Africa Sub-Saharan 7 The Social and Economic Impact of Standard Chartered in Africa Looking to the future, Africa’s growth opportunities are opportunities are growth Africa’s the future, to Looking evident. increasingly Rapid population growth becoming is example, for Nigeria, the economy. drive will help to in populous country most the third become to expected by 2050. By 2035, the China and India after the world participation by will, depending on labour force continent more with workforce, largest the world’s have women, the age of 20. under than half of the population currently one opportunity for sector represents The agricultural than 60 per cent holding more the region with growth, of which is 15 per cent land, only arable of the world’s under cultivation. currently impacted by the was income Exhibit Africa’s 1 shows that its For strongly. financial crisis of 2008, but rebounded of challenges a number however, continue, to story growth include poverty reduction, be overcome that must rising at growth and economic rising incomes, continued of 2.3 per cent. rate its population growth above well levels grown markedly. There has also been grown markedly. intra-African trade significant growth in Trade and investment between Africa Trade markets hasand other emerging

Africa’s story has changed. Twenty years ago the continent ago the continent years has changed. Twenty story Africa’s citing off by many commentators, written had been largely reasons as instability and political poverty, conflict disease, future. about Africa’s pessimism for in 1996 asked (IMF) even Fund Monetary The International marginalisation?”, Africa’s “What Sub-Saharan caused growth. economic Africa’s lack of hope for a general illustrating community business the international however, Today, be an increasingly to Africa Sub-Saharan considers while the IMF says destination, Africa investment attractive the over in growth regions developing all other lead could six of the is home to the continent Already, decade. next economies. fastest-growing world’s trajectory? change the region’s What has happened to demand for on relied growth In the past, the continent’s but the growth countries, other from resources natural improvements from stems now that is unfolding story home. closer to dependent less has become Africa years, ten In the past Only its growth. booms for commodity-driven on volatile has come decade the past over of GDP growth a quarter has been a huge rise in there Instead, commodities. from of a burgeoning and the creation consumption domestic in macro- improvements vast thanksmiddle class, to the region. throughout stability economic emerging and other Africa between and investment Trade the remains Europe While markedly. has grown markets with China and India trade partner, trading largest region’s has also There decade. in the last dramatically has grown trade. in intra-African growth been significant Africa’s growth story continued

43% of the population is 14 years old or under

Economists continue to debate the relative importance of various factors in Africa’s economic rise, but it seems certain that some combination of a growing middle class, increased world appetite for Africa’s resources, democratisation and economic liberalisation, urbanisation, conflict resolution, and 2.2 Economic fundamentals macro-economic stability and globalisation have all played Another factor in Africa’s favour is that Sub-Saharan Africa a part. has the youngest population in the world. Although birth rates are declining, 43 per cent of the population is 14 2.1 Reduced reliance on resources years old or under. The workforce is also expanding rapidly relative to the non-working population. While it is well known that demand for the continent’s natural As a result, the ratio of economically dependent people resources has helped to drive economic growth over the past versus those who are in work is improving. Provided that decade, this has been declining in importance since the the young people can be adequately educated, this factor, financial crisis of 2008. often referred to as the demographic dividend, will drive Although Nigeria and Zambia are dependent on oil and consumption and production in the future. copper, which contribute 36 per cent and 27 per cent of Sub-Saharan Africa’s workforce is forecast to grow faster GDP respectively, inflows from natural resources dropped than the workforce in all other economies, meaning that from 20 per cent of Sub-Saharan Africa’s GDP to 5 per cent the area will become increasingly competitive for labour- in the aftermath of the financial crisis. intensive sectors when compared with countries such as As the graph in Exhibit 2 shows, the manufacturing China where wage levels are increasing. There are also and services sectors make up 70 per cent of GDP, up from opportunities for agricultural improvement that will drive 60 per cent during the commodities boom. This indicates economic growth. that other factors are at play in Africa’s continued economic growth.

3 Source: World Development Indicators

8 The Social and Economic Impact of Standard Chartered in Africa Africa’s growth story United Nations United and on Trade Conference (UNCTAD) Development Development World Indicators it estimate UNCTAD be 12 per cent,to it is contends WTO 13-14 per cent The state of African cities of African The state 2010, UN-HABITAT Bank Development Africa brief April (AfDB): Market 2011: The middle of the Dynamics of the pyramid: in Africa middle class Sub-Saharan What caused in marginalization Africa’s al, et Yeats Trade, World & Development Finance 1996 7 8 9 4 5 6 3% global of the world’s in originates trade Africa, Sub-Saharan 1.2 per with compared in 1996 cent of all African trade. The fact The fact trade. of all African 9 9 The Social and Economic Impact of Standard Chartered in Africa These figures, however, hide important changes in the type hide important changes however, These figures, the IMF from is engaged in. Figures Africa that of trade the is shifting from Africa away show that Sub-Saharan partners, trading its traditional economies, developed most of the world. regions emerging than other rate at a faster India and China, collectively with Brazil, trade Growing known as the ‘BIC’ important reason is the most countries, trade. this shift, African for in regional along with growth international of Africa’s changing the nature These links are opportunity bringing both and risk. relations, economic 1990 and has doubled since within Africa trade Regional 12-13 per cent constitutes that this trade is growing shows that African economies economies that African shows is growing that this trade and that trade one another, from now differentiating are fall. to starting are barriers bring a number of benefits, including could trade Regional foreign from interest efficiency and more increased communities of major economic The prospect investors. and Zone Trade Free African join the to banding together help sustained would Zone a Cape-to-Cairo creating rise, any loss is on the trade intra-African While growth. be could integration regional to of momentum with regard is crucial to Integration growth. sustained to detrimental foreign attracts that dynamic marketplace a large, creating investment.and direct of exporting go in terms to has a long way still Africa raw export to goods and services.higher-value tends It still import and machinerymaterials and finished goods. Some own made with Africa’s of the finished goods it imports are such as oil. exports, of a form this is ‘tariff escalation’, for One reason lower face exports material in which raw protectionism finished products. than higher value-added tariffs export and cocoa coffee exporting for the tariff example, For and coffee than that on instant is much lower beans bars. chocolate

6 . 8 today. 7 , thanks to the growth in more in more the growth , thanks to 5 . 4 Urbanisation, productivity and the growing Urbanisation, productivity the growing and middle class Since 2004, Africa’s trade and investment has been and investment trade Africa’s 2004, Since as a and investment of trade The level steady. relatively such as East that in regions of GDP now resembles share while of GDP, 60 per cent to is equivalent Asia. Trade per cent 3 for accounts investment direct foreign of global trade, compared with 3 per cent compared of global trade,

2.3  urban areas. to rural from population is migrating Africa’s population Africa’s of Sub-Saharan 1990, the share Since 38 per to 28 per cent from in cities has grown who live in cities live cent, to is expected and half of the population by 2030 This fuels economic growth because productivity and because growth This fuels economic and city urban areas, in highest in productivity are increases than incomes higher and faster-growing have dwellers rurally. those who live that the middle reported Bank Development The African and 2010, from 1990 between had doubled in size class 326 million 157 million to Sub-Saharan Africa has seen a significant increase in its increase has seen a significant Africa Sub-Saharan partner In 20 years. in the past as a trading importance 1.2 per cent for responsible was Africa 1996, Sub-Saharan 2.4 The growing importance of trade 2.4 The growing affluent urban dwellers. These people spend between These people spend between affluent urban dwellers. than half of them would although more $2 and $4 a day, in the world. elsewhere middle class be considered not spending has and its increased middle class The growing goods firms, consumer to interesting more made Africa an has become consumption while rising domestic story. important part growth of the African Africa’s growth story continued

$100bn 2.5 Remaining challenges 2.6 The role of the financial sector of investment is needed Despite all the good news concerning Africa, the continent Many of the challenges mentioned above are to do with the annually to alleviate the still faces significant challenges and headwinds. Access to lack of capital throughout Sub-Saharan Africa. This is infrastructure gap in important services such as health and education is still an illustrated by Exhibit 3, which shows the ratio between the region issue for far too many, while corruption continues to credit and GDP in various African countries. constrain progress. To meet these challenges and drive For a country to flourish there must be a healthy ratio a rise in incomes, the continent will need to continue to between credit and GDP. In most African countries, there sustain growth rates well above its population growth is still not enough access to credit. Research shows that, rate of 2.3 per cent. Poor infrastructure remains a major although too much credit hampers economic growth, this impediment to growth. Estimations from the World Bank is the case only when the ratio between credit and GDP suggest that $100 billion10 of investment is needed exceeds 100 per cent11. The graph shows that all Sub- annually to alleviate the infrastructure gap and allow Saharan African countries except for South Africa and Africa to fulfil its potential. Mauritius are far below this threshold. Kenya’s ratio is Slower economic growth would have a negative impact on highest at 37 per cent and many countries are below 20 per the continent’s labour markets, which are already suffering cent. This suggests that access to finance is still a major from high levels of unemployment, especially among young constraint for development, and that the banking sector people. Over 10 million jobs need to be added each year in must grow to avoid supply constraints. order to absorb this growing labour force. However, one Banking activities that help to facilitate trade and problem in global labour markets including those in Africa investment include providing payment infrastructure, is the mismatch between supply and demand, which is a , guarantees, risk management, letters of credit function of insufficient skill building, particularly with and insurance. However, in Africa, most lending is short- respect to engineering. Education, in particular vocational term, and smaller businesses find it particularly hard to training, should be recalibrated to prepare the workforce access credit. for economies powered by innovation, entrepreneurship and technology. Africa’s success in creating quality jobs will also The banking sector in Africa is developing fast. African determine to a large extent whether the continent’s income banks are becoming increasingly important on a national, inequality will rise further or decline. regional and even pan-African level. However, foreign banks still account for more than half of the banking assets in Finally, at a more macroeconomic level, volatile commodity Sub-Saharan Africa. prices, on either the down- or upsides, will create challenges for African policy-makers that must be carefully Although Africa’s banks, excluding those in South Africa, managed. remained relatively insulated from the effects of the global financial crisis, they may suffer from its knock-on effects. The new regulatory environment that is emerging following the crisis is creating new costs for banks, which are likely to make it more expensive to provide trade finance, which may in turn hamper trade. This would not be in the interest of a developing region such as Sub-Saharan Africa. 10 Africa’s Infrastructure: A Time for Transformation Chapter 1: Meeting Africa’s Infrastructure Needs. Vivien Foster and Cecilia M. Briceño- Garmendia (Editors). Agence Française de Développement and World Bank, 2010 11 IMF working paper WP 12/161: Too Much Finance? Jean-Louis Arcand, Enrico Berkes and Ugo Panizza (2012)

10 The Social and Economic Impact of Standard Chartered in Africa Africa’s growth story 11 The Social and Economic Impact of Standard Chartered in Africa , Nigeria, is home to a growing middle class with increased with increased middle class a growing Lagos, Nigeria, is home to spending power

3/Standard Chartered in Africa

Standard Chartered plays an important part in the economy of many Sub-Saharan countries. It has been present in the region for over 150 years

Using its employees’ local knowledge and experience, Standard Chartered is able to tailor its products and services to the needs of its customers and clients

12 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered in Africa 13

Africa Compound Annual Compound (CAGR) Rate Growth including region – Africa and South Mauritius Africa exposure This excludes and in South Africa and includes Mauritius $2 billion of trade contingents

12 13 8% Chartered’s of Standard from came global income in 2012 Africa The Social and Economic Impact of Standard Chartered in 3.3 Consumer banking 3.3 Consumer is Africa Sub-Saharan across class middle The growing financial products sophisticated more demand for creating Standard momentum for in strong and services, resulting In 2012, banking business. consumer African Chartered’s $482 million, to 14 per cent rose banking income consumer and deposits. loans, advances from growth with significant banking consumer largest be the bank’s to continues Kenya by Botswana. followed in the region, generator income 3.4 Helping small businesses and support to finance also provides Chartered Standard the backbone (SME), enterprises small and medium-sized new The bank has introduced economy. of the African business expansion, business capital, working solutions for and yield enhancement. It has also introduced protection, ease with greater customers its SME provide services to service, on-line including a SME and convenient of access which allows customers Straight2Bank, banking platform, their offices. bank from to knowledge 3.5 Deep local of the in most experience than 150 years’ With more Standard in which it operates, countries 15 Sub-Saharan economies. embedded in local are operations Chartered’s regions, in different differently The bank has evolved systemically. needs and developing local adapting to shows how the bank lends money Exhibit 4, below, this for examined major countries in the four differently model varies how its business also illustrating study, depending on the length of time the bank has operated which the instance, in the particular market. In Nigeria, for wholesale banking plays a ago, 13 years bank re-entered with its long market and Kenya, while in Zambia role, larger Consequently, broader. activities are the bank’s presence, developed more are operations retail Chartered’s Standard jurisdictions. than in other and Zambia in Kenya

13 . As a result of this . As a result 12 growth, Africa accounted for 8 per cent of the bank’s global of the bank’s 8 per cent for accounted Africa growth, by 2012 and the bank has ambitious plans for income years. three the next over further and growth investment are global assets Chartered’s of Standard per cent Three of $7.1 billion local a total Africa, now in Sub-Saharan With well over 6,000 corporate client relationships in client relationships 6,000 corporate over With well wholesale banking has been the Africa, across countries the region. in business Chartered’s of Standard main driver a similar of revenues, 70 per cent around for It accounts the bank operates. where regions the other to percentage cash finance, of trade a wide range The bank provides management, risk management, securities, foreign and corporate raising capital advisory, sovereign exchange, In 2012, of clients. a wide range financing solutions to $1 billion for exceeded in Africa wholesale banking income 25 per cent rose income time, while network the first year-on-year. 3.2 Wholesale banking and $3.5 billion international finance. The bank’s operating operating The bank’s finance. and $3.5 billion international 15 per cent. $1.6 billion in 2012, up was in Africa income liability tax in a corporate had Chartered In 2012, Standard liability the tax over its total $165 million and of over Africa $685 million. around 2012 was to years five last

Thanks to its unique history and footprint in Sub-Saharan in Sub-Saharan and footprint its unique history Thanks to act positioned to on the is well Chartered Standard Africa, The bank plays a offers. opportunities that the continent markets, in African role important socially and systemically acting in the sector and a pioneer of as a thought leader banking innovation. presence. Chartered’s so does Standard As grows, Africa the over has doubled in size in Africa business The bank’s the impact of the financial crisis, despite years five past at 15 per cent growing with income 3.1 Strong growth in Africa 3.1 Strong Standard Chartered in Africa continued

3.6 Leveraging international knowledge and finance

The bank uses its international balance sheet to provide finance for African customers, and leverages its specialised knowledge gained from providing complex financial products elsewhere in the world. Some of the best examples of customers that have benefited from this are large companies and governments, and also in the area of infrastructure projects. These tend to have large capital requirements, and need products with complicated structures. Standard Chartered acts as advisor to a growing number of governments and public sector bodies across Africa. The bank has supported governments in strengthening their credit ratings, engaging with the international investor community and in raising funding in the appropriate currency. This support is vital as African governments seek to reconcile their ambitious development agenda, including the financing of much needed infrastructure, with a commitment to debt sustainability. In Ghana, for example, Standard Chartered assisted the Bank of Ghana to develop an efficient and effective The exposure presented in Exhibit 4 excludes the syndicated electronic payment system for the country. Jointly with the amounts exceeding the exposure on Standard Chartered’s Ghana Inter-Bank Payment and Settlement Systems own balance sheet as of 31 December 2012, which amount Limited, the two banks initiated the dialogue amongst to a total of $1.8 billion. various shareholders in the banking industry to chart the way forward in creating an effective payment system. The system is expected to improve the productivity in the country as well as making it easier to transfer money, stimulating Ghana’s international trade.

14 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered in Africa 100 to are new branches Standard be added to existing Chartered’s network branch 15 The Social and Economic Impact of Standard Chartered in Africa Power Africa productivity. a huge impact gap will have on the region’s power Plugging Africa’s than $2 billion of energy projects financing more to has committed Chartered Standard six African States, the United a partnership Initiative, Africa between under the Power Africa The Power sector. and the private including Nigeria and Kenya, governments efficient electricity more of cleaner, than 10,000 megawatts more scheme will deliver – generation power current of Nigeria’s 250 per cent to – equivalent generation electricity than 20 million new households and businesses. to by more access increasing 3.9 Opportunities for the future 3.9 Opportunities for in wholesale growth for is huge room there ahead, Looking prospects macroeconomic strong banking, Africa’s given investment,which amounts infrastructure and the need for Bank. the World to $100 billion, according to and offering its consumer grow The bank is also planning to its to that it will add 100 new branches in 2012 announced will there years five network. the next Over branch existing middle growing rapidly servebe opportunities to Africa’s insurance management products, with wealth class products. and investment products Investing in communities by delivering employee by delivering in communities Investing gender and education, and health, volunteering positive that promote programmes environmental outcomes. social and economic Contributing to sustainable economic growth by providing by providing growth economic sustainable to Contributing and job growth support economic to finance effective of this report. area focus This is a key creation. strong that practises company Being a responsible workforce inclusive an creates governance, corporate impact.and minimises its environmental

• • • In Sub-Saharan Africa, as in all of its markets, Standard Standard as in all of its markets, Africa, In Sub-Saharan its business into sustainability has integrated Chartered main priorities: three on is focused model. Its approach 3.8 Acting responsibly As well as history and local knowledge, Standard Chartered Chartered knowledge, Standard and local As as history well capability skill base and training international brings a broad improve helping to it operates, where the markets to and innovation financial efficiency through in these markets rate interest introduce to first the The bank was expertise. Uganda and Kenya, to the continent, ATMs to swaps and currency in Tanzania, businesses for banking internet hedging in Ghana. rate and interest 3.7 Spurring innovation innovation 3.7 Spurring 4/Standard Chartered’s quantitative impact

Standard Chartered supports some 1.9 million jobs in Sub-Saharan Africa and more than one per cent of the region’s GDP

Mombasa Port – Standard Chartered’s financing supports $1.3 billion of Kenya’s global trade

16 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s quantitative impact Financial sector allocation sector allocation Financial as per appendix A.4 and South Africa excluded are Mauritius this study from ‘International finance’ is finance’ ‘International financing that is provided in businesses to from Africa Sub-Saharan in the Standard elsewhere for network, Chartered the bank’s from example or subsidiaries branches in Asia or Europe. project International of $326 million finance as has been excluded are these projects and pre-revenue early it is too therefore judge their eventual to impacteconomic 15 16 14 1.9m by supported jobs are Chartered Standard the region throughout 17 The Social and Economic Impact of Standard Chartered in Africa , Standard Chartered supports $10.7 billion Chartered , Standard 16 Standard Chartered’s impact on growth and jobs Chartered’s Standard Africa in Sub-Saharan of value added and some 1.9 million jobs throughout added and some 1.9 million jobs throughout of value of the 1.2 per cent This amounts to Africa. Sub-Saharan labour force. the local of cent GDP and 0.6 per region’s in which Standard only the countries When considering 1.8 per is present,contribute these numbers Chartered of the labour force of GDP and 1.2 per cent cent added than of of value A higher percentage respectively. the bank finances because is supported, the labour force than the productive more sector clients that are formal sectors and countries. in the respective average with the impact the economic associated In addition to the bank has Chartered, by Standard financing provided financing underwriting impact large an economic through that the bank its clients. This means for transactions amount the entire a client that it will arrange to guarantees of rate (typically at an agreed of financing required find to subsequently acting as a co-ordinator interest), the financing and to partner contribute bankssyndicate to Chartered risk. the actualassume Should Standard credit provide of banks willing to find a syndicate be able to not amount of the financing, be the bank would the complete the underwritten amount in full. provide liable to new financing risk in raising a client’s Underwriting reduces the full amount of that clients will obtain by guaranteeing it of interest the rate (and potentially financing required in assuring shall pay). Underwriting plays role a significant financing in emerging large-scale to access companies as per outstanding the deals For such as Africa. markets had underwritten an Chartered 2012, Standard year-end clients. additional amount of $1.8 billion of financing for amount throughout a larger Although the bank underwrote be to the $1.8 billion at the year-end assume we the year, of the full year. representative benefit of underwriting mitigate The immediate is to capital financing risk. The underwriting bank also facilitates of the as the co-ordinator in its role country a flows to of the results derived from in-depth analysis of the bank’s analysis in-depth of the bank’s from derived of the results markets: Nigeria, Kenya, activities financing in four and these individual countries for and Ghana. The results Zambia extrapolation 9. The to 6 described in chapters are methodology of the methodology, are and limitations in the Appendix.discussed 4.2  to provided finance and international the local With both in Angola, individuals and financial institutions companies, Gambia, Ghana, Kenya, d’Ivoire, Cote , Botswana, and Uganda, Zambia Tanzania, Leone, Nigeria, Sierra Zimbabwe

. Exhibit 5 shows 14 and client segments. 15 Standard Chartered’s presence in presence Chartered’s Standard Africa Sub-Saharan Standard Chartered’s portfolio broken down by loan portfolio broken Chartered’s Standard sectors economic

The clients receiving this finance use it to produce or trade or trade produce use it to this finance The clients receiving in value employment and results output that generates this In addition to savings and taxes. added, salaries, profits, impact,direct added and employment are value indirect clients spend money Chartered’s Standard because supported be traced on goods and services. can These ripple effects using the input-output methodology (see Appendix). In the sections added and employment the value following described loans are Chartered’s with Standard associated based on the extrapolation are These results quantitatively. 4.1  analysis of Standard the quantitative point for The starting impact and jobs is the bank’s on growth Chartered’s 2012. The in December Africa Sub-Saharan to exposure local of $10.6 billion includes $5.1 billion exposure total finance sheet, trade on-balance unfunded $2 billion local and finance general as $0.8 billion international as well finance trade $2.7 billion international Standard Chartered’s quantitative impact continued

financing. It is difficult to attribute the economic impact associated with underwritten syndicated deals to the $1.8bn underwriter and the other syndicate partners who assume of additional finance part of the credit risk. Taking into consideration the underwritten by Standard Chartered as additional $1.8 billion underwritten by Standard Chartered, per year-end 2012 which is not captured in the model, the total value added supported by the bank increases by $1.6 billion (0.2 per cent of GDP) to $12.3 billion. The total supported employment increases by 206,000 jobs (0.1 per cent) to 2.1 million jobs. In order to circumvent attribution of the economic impact of syndicated deals, we focus on the economic impact associated with the loans that Standard Chartered actually carried on its balance sheet as per year-end 2012. Exhibit 6 shows the value added and employment impact broken down by the type of finance. Approximately two-thirds of the total impact is related to finance provided locally by Standard Chartered, circa 30 per cent comes from international finance and the remainder is associated with In Exhibit 7, leveraged impact comes from people that Standard Chartered’s operations.17 borrow against the salaries they earn, be it direct or indirect, thereby increasing their spending. This leverage creates additional value added and employment. In the same Exhibit, induced employment comes from people re-spending their (direct and indirect) salaries. However, these salaries are already included in the direct and indirect value added impact, so no induced value added has been computed as that would amount to double counting. Table 1 shows that salaries are the largest part of value added related to Standard Chartered. This is because labour is still the dominant factor input in the developing economies of Sub-Saharan Africa, where capital is scarce. Therefore, although a bank such as Standard Chartered is associated with large companies, most value added accrues to households. Standard Chartered supports some $1.8 billion of tax payments to governments in Sub-Saharan Africa, which is the equivalent of 1.1 per cent of the total tax receipts of governments in the region. Out of this, $1.3 billion is paid directly by Standard Chartered and its clients.

Table 1: Value added associated with The most striking aspect of Exhibit 7, below, is that the Standard Chartered in SUB-SAHARAN 17 Salaries and taxes paid by Standard Chartered, majority of the value added that is associated with Standard AFRICA by component (in $ million) profits generated for local Chartered, is coming directly from its clients (direct % of total shareholders in Standard impact). For the related employment the opposite is true; value Chartered Group Component Value added added companies and the some 78 per cent of total related jobs are supported indirect impact coming through indirect effects. This corresponds with what one Household income $6,027 million 56% from Standard Chartered would expect, as the bank’s portfolio firms typically have Profits and savings $2,892 million 27% procuring goods and services higher productivity per employee, paying more taxes and Tax income $1,822 million 17% higher salaries, and making more profit than smaller, informal sector suppliers and suppliers’ suppliers do.

18 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s quantitative impact 22% to exposure of the bank’s is to Africa Sub-Saharan sector the manufacturing 19 The Social and Economic Impact of Standard Chartered in Africa The pathways through which value added is being created added is being created which value through The pathways shown in Exhibit 10. Although are sectors within the various its own operations, through value creates Chartered Standard the sectors it from added comes of the value most the is to exposure largest Chartered’s Standard finances. and service sectors. manufacturing, wholesale and retail the manufacturing to flow of capital large the Despite with it, added associated value as explained the total sector, by the This is explained terms. is smaller in relative above, sector the manufacturing Kenya, for that,fact except In the outside Africa. imports much of its input from is associated services sector a similar amount of capital capital- the sector is less added because value with more of the inputs. Most imported and needs fewer intensive households. salaries that go to added are value Combining the two horizontal bars from Exhibit8 yields the from bars horizontal the two Combining the quality for measure which is a good added per job, value employment, surprisingly, shown in Exhibit 9. Not of related itself have Chartered sector and Standard the extraction of their capital per job because added value the largest and wholesale and retail The jobs in agriculture intensity. Across before. as explained productive, much less are in the wholesale the GDP per worker Africa Sub-Saharan below the sectors is substantially and agriculture and retail The jobs in these sectors that are of $2,800. average this at or above are Chartered with Standard associated the more to finance the bank provides because average firms in the economy. productive

The breakdown of Standard Chartered’s impact the over Chartered’s of Standard The breakdown sectors, as shown in Exhibit the 8 highlights economic Chartered’s Standard from sectors that benefit most The impact on a sector depends on in the region. presence labour or capital. inputs, of the predominant the nature especially labour- are and wholesale and retail Agriculture the small amounts of value be seen from as can intensive, number of people employed. Capital added and the large direct a larger have to these sectors tends to provided effect. As of the bank’s shown in Exhibit 5, 22 per cent the is to Africa in Sub-Saharan exposure total sector. manufacturing added value related total of cent only some 18 per However, of with the exception This is because, that sector. arises from imports countries sector in most the manufacturing Kenya, sectors other while production for needs it goods the of most the sector as intermediary little from relatively procure sector. the transportation is true for demand. The reverse portfolio total Chartered’s of Standard Eight per cent of demand because added of value 13 per cent generates in the be found employment can sectors. Most other from sectors. and wholesale and retail manufacturing agriculture, and sectors such as extraction capital-intensive In more jobs. supports fewer Chartered utilities, Standard 4.3 Contribution by economic sector by economic 4.3 Contribution Exhibit 10 Standard Chartered in Africa Measuring our social and economic impact Standard Chartered has been operating in Africa for over 150 years and is present in 15 African countries and active in 36 countries across the continent. Currently the bank serves over one million retail customers, approximately 100,000 small and medium-sized enterprises, and over 6,000 corporate clients in Sub-Saharan Africa. It provides a broad range of wholesale and consumer banking services. Through its operations and lending, it creates a ripple effect through the entire economy, directly and indirectly impacting growth and jobs.

Economic challenges

Growth Gross national income (GNI) per capita in 2012 was $1,345. 60 per cent of Africans live in low-income countries, which on average will need 25 years to reach lower middle income18 status at current growth rates.

Employment Labour force growth in 2011 was 3.1 per cent19: 10,270,000 jobs need to be added annually in order to absorb this growing labour force.

Infrastructure An estimated $100 billion per year of investment is needed to fill Africa’s pressing infrastructure needs, mainly in power, water supply and transportation20.

What makes us different?

Global Reach Innovation Sustainability The bank uses its global network and Standard Chartered introduces products The bank promotes responsible business expertise to help businesses trade with and services that meet client and practices. It contributes to sustainable the world. In 2012, Standard Chartered customer needs, including risk economic growth and invests in financed $7.2 billion of Africa’s trade. management. It established the first communities. In five African countries, digital branches across several African the bank is providing training to SMEs, markets. In markets like Ghana and to improve their operations and increase Kenya, it was the first to introduce their access to finance. interest rate swaps, and currency and 18 World Bank country classification based on GNI interest rate hedging. per capita: lower middle income from $1,036 to $4,085 19 World Development Indicators 20 Agence Française de Développement and World Bank, 2010

20 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s quantitative impact 21 The Social and Economic Impact of Standard Chartered in Africa Steward Redqueen www.sc.com/impactAfrica Analysis Chartered by Steward Standard Copyright©2014 Standard Chartered’s quantitative impact continued

Table 2 below summarises the economy-wide impact As expected, value added and employment effects are associated with $1 million of finance provided to the largest in agriculture because this sector is most capital- various economic sectors for the entire Sub-Saharan Africa starved. Zambia is the exception here because of its region as well as for the four countries analysed in detail. large-scale commercial agriculture, which is both highly The regional multipliers must be interpreted with some productive as well as less constrained by finance. The caution because they are a weighted average of the four relatively high productivity of Kenyan manufacturing is also individual countries, which have a higher GDP per capita clear, whereas in Zambia the marginal impacts of finance than the region overall. Potentially, this leads to a relative provided to manufacturing are highest. overestimation of related value added and an An important caveat in the interpretation of Table 2 is that underestimation of the number of related jobs as countries the impact here only includes the backward linkages21. studied in detail are relatively more developed than are Although in the utilities sector these backward linkages are other countries in the region. still substantial, it is clear that the main development impact of power and water infrastructure is coming from forward linkages, the enabling effect on the rest of the economy.

Table 2: Broader impact for $1 million provided to the various economic sectors

Client segment Nigeria Kenya Zambia Ghana Total SSA Agriculture value added 1.5 1.5 1.0 1.2 1.3 employment 286 337 131 383 274 Extraction value added 0.9 0.7 0.7 0.8 0.8 employment 40 134 120 113 98 Manufacturing value added 0.9 0.9 1.6 0.9 1.0 employment 223 164 291 324 249 Utilities value added 1.0 0.7 0.6 2.0 0.7 employment 144 151 87 114 139 Construction value added 0.8 0.9 0.9 1.2 0.9 employment 110 129 113 179 127 Services value added 1.1 0.9 1.2 1.5 1.0 employment 205 152 219 164 166 Transport & Communication value added 0.5 0.7 0.9 1.7 0.9 employment 95 74 118 205 118 Wholesale & Retail value added 0.9 1.0 1.0 0.8 0.8 employment 177 102 131 150 138 Weighted Average value added 0.9 0.9 0.9 1.1 1.0 employment 174 148 148 223 170

21 Backward linkages refer to effects on suppliers and suppliers’ suppliers, they are demand driven

22 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s quantitative impact 0.7 1.0 1.0 1.2 0.9 0.9 2.2 170 181 126 149 169 200 409 Total SSA 1.1 1.0 1.2 0.9 0.9 0.9 3.2 217 697 158 223 184 234 2 17 Ghana 0.7 0.7 0.9 0.9 0.9 0.9 3.3 119 116 131 152 134 148 566 Zambia 23 The Social and Economic Impact of Standard Chartered in Africa 1.8 0.9 0.9 0.9 0.9 0.8 0.8 116 179 133 122 297 165 148 Kenya Similarly for the economic sectors, the effect of $1 million of $1 sectors, the effect the economic Similarly for 3. client segments is shown in Table different of financing to the countries, between some differences are Although there often impacts are Larger is comparable. picture the overall and Ghana because Zambia such as in economies found higher in these countries are on capital returns marginal with the size the financial sector is smaller compared given financing. SME true for This is especially of the economy. 3 depend on the sector in Table The multipliers presented segments. These of clients in the various composition country’s show that each differences country-specific total and that while the is different structure economic of the impact indication a first of are results Sub-Saharan individual countries. be applied to they cannot finance, debt 1.2 0.9 0.9 0.9 0.9 0.9 0.8 174 212 161 173 185 233 140 Nigeria value added value added value added value added value added value added value added employment employment employment employment employment employment employment Local Corporate Local Global Corporates Global Weighted Average SME Finance Financial Institutions Financial Commodity Traders & Agriculture Retail Banking Client segment segments customer the various to for $1 million provided impact able 3: Broader

T The results presented by sector can also be presented in also be presented sector can by presented The results segment. of the impact customer terms per Standard is generated Africa impact in Sub-Saharan Chartered’s of the 80 per cent primarily by wholesale banking: roughly in wholesale added and employment impactvalue are making banking together and retail segments with SME up the rest. 4.4 Contribution by customer segment by customer 4.4 Contribution Standard Chartered’s quantitative impact continued

4.5 Contribution to trade

Africa as a whole is a net exporter, mainly of commodities. As shown in Exhibit 12, Standard Chartered through its general and trade finance, supports Sub-Saharan trade worth $7.2 billion, which is equivalent to 1.2 per cent of Sub-Saharan Africa’s total international trade. When broken down further, this represents some $4.5 billion of imports to Sub-Saharan Africa (1.7 per cent ) and $2.7 billion of exports from the region (0.8 per cent). When we only take into account the countries in Sub-Saharan Africa where Standard Chartered is present the relative contributions would be 1.6 per cent of total trade, 2.2 per cent of imports and 1.0 per cent of exports. If underwritten loans and letters of credit issued by other African banks confirmed by the Standard Chartered branches outside Africa are taken into account, the total imports supported increase by $1.6 billion to $6.2 billion (2.3 per cent of total imports of Sub-Saharan Africa). The exports supported rise by $0.9 billion to $3.6 billion Analysing total trade related to Standard Chartered by the (1.1 per cent of total Sub-Saharan Africa’s exports). type of finance that it supports shows that while trade To put these figures into perspective, it is important to finance supports the majority of overall trade, general note that not all of African trade involves banks. Non- finance plays a relevant role, especially in supporting intermediated trade flows include intercompany imports exports. This is shown in Exhibit 13. The analysis further and exports, and the trade flows of large multinational shows that companies mainly use structured trade finance companies. No reliable figures are available regarding the products for their exporting activities, but use other types size of the flows that are supported by banks, but it is of trade finance to finance imports. realistic to assume that Standard Chartered’s share of the intermediated flows is substantially larger than its share of total African trade.

22 World Bank 2012 data on import and export for all Sub-Saharan African countries

24 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s quantitative impact 25 The Social and Economic Impact of Standard Chartered in Africa Spurring trade across Africa signed a $200 million risk Chartered Standard trade short-term help facilitate to In order Bank (AfDB). Development This collaboration with the African participation agreement by limits constrained were supports banks that traditionally a wider number of African in finance trade demand for market address By helping to with their correspondents. sectors such as agribusiness economic in vital support trade aims to the programme Africa and manufacturing. This chapter sets out Standard Chartered’s economic impact economic Chartered’s out Standard sets This chapter as a whole. The results region Sub-Saharan in the entire deep-dive from based on extrapolation derived were and Zambia of Nigeria, Kenya, the markets into studies in countries these four 6-9 will examine Ghana. Chapters detail. more

Exhibit 14 shows that the majority of Africa’s imports that Exhibit the majority 14 shows that of Africa’s goods from capital are Chartered by Standard supported are oil (refined) and North and fuel from America, China, Europe Exports, hand, go by a countries. on the other producing Apart from countries. African other to fraction much larger flow in underlying trade uncertainties large the relatively is Chartered this might be that Standard for a reason data, crude oil and copper large in financing the involved less goods than it is in exportable that flow out of Africa exports sectors. other from 5/Standard Chartered’s other contributions – a qualitative assessment As well as those impacts that are quantifiable, Standard Chartered influences the Sub-Saharan African economy in myriad ways that are difficult to model and measure

Standard Chartered’s head office in Kenya, where the bank has operated for over 100 years

26 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s other contributions - a qualitative assessment In this secondary market market In this secondary Chartered Standard government purchases other bonds from than rather investors the government from itself 23 27 The Social and Economic Impact of Standard Chartered in Africa , which has helped to establish a yield curve for a yield curve establish for , which has helped to 23 government bonds that acts bonds that government which as a benchmark against pricing Better be priced. can financial instruments other and capital scarce of the optimal allocation in a more results growth. economic increases therefore 5.4 Supporting of Islamic banking the development Islamic banking provide to is preparing Chartered Standard interest of growing an area Africa, and West services in East it is By the end of this decade financial markets. African for – or non-interest that Sharia-compliant possible quite of 10 per cent up to for account to grow banking could countries, African or six Sub-Saharan in five banking assets and Nigeria. including Kenya In Zambia, the bank has introduced online banking and Visa the bank has introduced In Zambia, policies borrowing consumer the bank’s Changes to cards. a broader to available making loans to contributed have servants, of civil loan US dollar while the bank offers range high-end customers. to facilities to In Nigeria, the bank has doubled the loan tenure six of up to tenures employees with extended Government years. a maximum of three banks while most offer years, in home This allows employees the opportunity invest to has also been Chartered Standard projects. improvement as a cards and credit mortgages offer bank to the first rate. interest at a reduced package and created ATM the first In Ghana, the bank introduced banking SME addressing to unit dedicated the first has assumed Chartered In 2013, Standard requirements. in banking in Ghana with the space of the digital leadership banking as well digital mobile app for launch of the ‘Breeze’ nation’s in the branch all-digital up of the first as the setting . capital, that supports transactions The payments infrastructure people across made via mobile phones, used by millions of by provided payment systems on robust is reliant Africa, Chartered. banks including Standard commercial markets 5.3 Deepening of capital it ensures is important because market A liquid secondary and that priced accurately more and bonds are that stocks in markets In most efficiently allocated. is more capital international is present, its large Chartered which Standard be an active player in the capital allows it to sheet balance is one Chartered Standard example, for In Kenya, markets. bond government players in the secondary of the largest market

Risk management: derivatives bank size, and hedging

Standard Chartered contributes to the economies in which the economies to contributes Chartered Standard and financial products innovative by introducing it operates customers to convenience provide services. These products more as the public sector as well businesses and make efficient. and ATM the first established Chartered Standard In Kenya, also the It was banking centre. 24-hour automated the first personal loans in the unsecured introduce bank to first Solutions Business The bank also launched the first country. remote and a round-the-clock customers, corporate for customers. business cheque printing service for 5.2 Financial innovation 5.2 Financial Derivatives help businesses, including financial institutions including financial institutions help businesses, Derivatives risk manage trading to materials, raw of vital and importers fluctuations against themselves in currencies, by protecting Mitigating these risks prices. and commodity rates interest risk entrepreneurial take them to encourages companies for growth. spur economic and therefore with a farm, Sunland, a rose the bank provided In Kenya, risk. currency foreign reduce hedging solution to structured the Netherlands, to the bulk of its flowers Sunland exports Chartered that Standard contracts and the forward volatility, euro hedge against helped the bank to provided with certainty. budget Sunland to and allowed of the development to is contributing Chartered Standard in which it operates. guidelines in the countries derivatives in June programme a training In Nigeria, the bank organised Bank of Nigeria officials on derivative Central top 2013 for this with and risk management.products The bank repeated in and Ministry Bank Finance of the Central officials from closely with the also worked Chartered Standard Zambia. policy Bank of Nigeria in drafting guidelines on Central on new banks as part group of a working for derivatives development.product 5.1  In addition to the quantifiable impact, Standard Chartered Chartered the quantifiable impact,In addition to Standard difficult to that are in ways economies influences in Africa processes is transforming Its influence model or measure. This section highlights the region. across and outcomes data, relevant activities, other providing some of the bank’s available. where Standard Chartered’s other contributions – a qualitative assessment continued

The bank is using its expertise and contacts to facilitate the 5.5.2 Financial crime prevention development of Islamic banking in the region. In 2011 the Standard Chartered continually updates its systems and bank arranged a study tour to Dubai and Abu Dhabi for a processes to guard against money laundering, terrorist Nigerian official delegation including representation from the financing, fraud and corruption. This has an impact on the , the Debt Management Office, the economy, as financial crime results in lower tax revenues, Securities and Exchange Commission, the Ministry of Justice distorted markets, diverted resources and reduced wealth. and Infrastructure Concession Regulatory Commission. Standard Chartered employees worldwide are trained in anti-money laundering policies and procedures. The bank also works closely with governments, law enforcement 5.5 Governance and business practices agencies, regulators and the banking industry, in a number of countries, including Zambia, Nigeria and Kenya, to share Another way in which Standard Chartered contributes is best practice and contribute to ongoing initiatives that by helping its clients adopt best practices when it comes prevent, detect and respond to potential criminal activity. to corporate governance. Standard Chartered encourages clients to put in accountable management, better boards, In Nigeria, the bank conducts financial crime risk (FCR) and adopt higher standards of financial reporting and related training programmes for the Central Bank of Nigeria disclosure. This improves the economy as a whole because and The Nigeria Deposit Insurance Corporation staff. In the well-governed companies carry lower financial and past four years, the bank has facilitated sessions on FCR non-financial risks and generate higher returns. They also for the Intergovernmental Action Group Against Money have better access to external finance and are less likely Laundering in West Africa (GIABA) for countries within to suffer corporate crises and financial scandals. the region. 5.5.1 Human resources and skills development In Kenya, Standard Chartered participates as a thought Standard Chartered’s recruitment and training programmes leader in customer education on ATM fraud awareness have a potentially substantial influence on the financial in partnership with the Kenya Credit and system in Zambia, Nigeria, Kenya and Ghana. By adhering to Association and the Kenya Bankers Association. strong principles of diversity and inclusion and recruiting the In Zambia, the bank helped to establish the Financial best applicants, regardless of their background or gender, Intelligence Centre (FIC), which aims to counter financial crime. the bank sets a standard for others to follow. The bank provides employees with leading-edge training, which In Ghana, two of the bank’s staff are executives of a contributes a public good to local economies, as some of professional body that regulates issues of anti-money the employees leave and take their skills with them. laundering in the sub-region. Many senior leaders of the banking sector across Africa got 5.5.3 Sustainable finance their start at Standard Chartered. For instance, the CEOs of Standard Chartered recognises that its financing decisions six of the ten leading banks in Kenya are ex-employees of have a potential impact on people, the society and the Standard Chartered, while in Nigeria, the bank has seven environment. The bank has 16 position statements on ex-employees in management and board positions at high-impact sectors such as oil and gas, mining and leading banks. In Ghana, three of the leading banks in the forestry, as well as on key issues, such as child labour, country have CEOs who were formerly Standard Chartered climate change and water. staff in addition to more than 13 alumni who now hold The statements set out the environmental and social senior management positions across the industry. standards that Standard Chartered expects of itself and its clients. The bank’s sustainable finance approach enables it to identify risks and propose solutions at an early stage. The bank utilises these standards to underpin its underwriting decisions. For example, in Ghana, the bank’s financing of the Jubilee Oil Fields, which saw the country join the group of oil producing countries, was in line with its commitment to the Equator Principles. Standard Chartered is also committed to financing clean technology, with $8.4 billion mobilised towards the sector globally. By the end of 2011 Standard Chartered had trained more than 3,400 front-line staff in sustainable finance.

28 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s other contributions - a qualitative assessment $10 0m be raised to expected Chartered by Standard avoidable tackle to by 2020 blindness 29 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered staff work with NGO Sightsavers to screen to screen work with NGO Sightsavers staff Chartered Standard blindness of causes common Zambians for

5.6 Community investment 5.6 Community investment Chartered activities,Alongside its business Standard through in which it operates the countries to contributes programmes. investment of community a wide range 5.6.1 Seeing is Believing main global Chartered’s Seeing is Believing is Standard up in 2003 set It was programme. investment community over and has committed blindness, avoidable help tackle to the Globally, region. the Africa to date $18 million to $100 million by 2020. raise hopes to programme Nigeria has been Under the Seeing is Believing programme, and current past million of funding for $3.25 allocated by Seeing is A furtherprojects. $6 million will be invested including $5 million for 2020, Believing in Nigeria before under the childhood eye projects one of five health 2012, January 2006 and December Between programme. for operations Seeing is Believing has funded cataract people in Nigeria. Standard 18,000 approximately the Nigeria music school to a donated has also Chartered the foster the Blind. The school is designed to Society for students. visually impaired of talents musical natural

5.5.4 Protecting the environment 5.5.4 Protecting to responding to is committed Chartered Standard for global targets stretching and has issues, environmental impact. the bank is its environmental Globally, reducing per cent use by 71 its water reducing to committed it has where and 2019 in all properties 2008 between paper use office reduce and to facilities, water over control it owns. It per full-time employee in all properties 10kg to use by 35 per of its energy the intensity reduce plans to in temperate and 20 per cent locations in tropical cent 2008 and 2019. between locations in Nigeria has been designed office new head The bank’s and in Energy Leadership for standard the meet to the bank has Design (LEED). Here Environmental initiatives, of sustainable a wide range implemented efficiency water such as rain water including enhanced of cooling cost the overall harvesting. It has also reduced control sensors to motion the building, by introducing all areas. lighting to in two biogas stations the bank has established In Kenya, refuse five as constructing homes, as well children’s up the environment clean chambers in the Kiandutu Slum to of waste. the re-use and encourage in 2013 Zambia in than 1,000 trees more The bank planted It also launched the ‘Go forests. depleted help restore to the public encourage in June to campaign Recycling’ Green recycle. to in planting over the lead In Ghana, the bank has taken the across locations in strategic 22,000 indigenous trees the number in on increasing with a focus country subsequent years. selling and marketing 5.5.5 Responsible best spread its employees, the bank helps to By training the wider financial to in selling and marketing practice services industry in Africa. has embedded Chartered banking, In consumer Standard its culture, into practices Fairly Customers Treating It has processes. and general governance Charter, Customer the time and reduced forms simplified its account-opening open an account. In wholesale banking, to the bank it takes with clients on deepening relationships focus to continues their achieve the solutions they need to provide to goals. business Standard Chartered’s other contributions – a qualitative assessment continued

Standard Chartered in Kenya has been sponsoring the annual since 2003 to raise funds for 50,000 Seeing is Believing. The marathon has grown to become girls from low-income the biggest sporting and social event in the country. Since families have been reached by the Goal 2003, proceeds from the Standard Chartered Nairobi project Marathon have sponsored more than 5,000 cataract paediatric surgeries in five hospitals across Kenya as well as funded the construction of boreholes, dams and rock catchments in Samburu District with an aim of eradicating trachoma. Lack of access to water is a major factor in the spread of trachoma, which is the most common cause of preventable blindness. In Zambia, Seeing is Believing has changed the lives of a million people and Standard Chartered is committed to investing a further $1.2 million in the project over the next five years. In 2012, the bank’s partnership with Sight Savers International meant that 65,000 adults and children were screened for eye diseases, and 2,000 cataract and trichiasis operations were performed. Standard Chartered and Sightsavers also dispensed 7,000 pairs of spectacles and 400,000 doses of trachoma drugs. In Ghana, Seeing is Believing has benefited about 6 million people. In October, 2013, the bank launched a new three-year phase under the initiative to the tune of $1.25 million which is expected to bring benefits to over 7.5 million people by December 2016. 5.6.2 Goal Standard Chartered also runs a programme called Goal, which uses sport to teach life skills and financial literacy to adolescent girls from low-income families. Since its inception, the programme has reached almost 50,000 girls in Nigeria, Zambia and Tanzania.

In Zambia, where the programme was launched in 2011, Standard Chartered’s ‘Goal’ programme uses sport to empower around 200 Goal instructors now work with schools and educate girls in Nigeria, Zambia and Tanzania and communities. In 2012 and 2013 more than 2,000 girls had enrolled and attended Goal sessions at various sites In Ghana, Goal benefits both boys and girls. This programme across Zambia. has reached over 1,140 school children and 150 physical In Nigeria, Goal has become one of the most respected education teachers, who will go on to train a further 15,500 sports development programmes in the country. Goal has boys and girls. trained more than 14,000 adolescent girls aged between 11 and 16 in Nigeria, and is available in 16 schools in two Nigerian cities.

30 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s other contributions - a qualitative assessment 31 The Social and Economic Impact of Standard Chartered in Africa 5.6.5 Financial literacy 5.6.5 Financial also supports by providing economics Chartered Standard businesses. local to training entrepreneurs local for training In Nigeria, the bank provides Standard its workshops, Through basis. on a regular capital more access to customers Nigeria helps Chartered them the and offers their businesses, grow and services to owners. business other with opportunity network to with collaborates Chartered and Ghana, Standard In Kenya companies. owners of small and medium-sized train PwC to young train also uses its skills to Kenya Chartered Standard team finance In 2012, the bank’s people in financial literacy. on school students secondary for workshops conducted excellence, academic such as achieving topics different and making, managing and saving money. building a career, training financial literacy the bank provides In Zambia, groups. stakeholder various to programmes 5.6.6 External recognition of its in recognition awards several The bank has received Chartered In 2012, Standard Africa. across businesses by the Kenya bank in Kenya’ foreign ‘Best awarded was the ‘Green and also received Association of Manufacturers, In Nigeria, the bank received Award’. Building Recognition 2012. in Bank’ Compliant award Tax the ‘Lagos State Bank ‘Best awarded was Chartered Standard In Zambia, Bank’ Internet by Global ‘Best by Euromoney; in Zambia‘ Bank in ‘Best and years); consecutive three (for Finance In Ghana, the bank won Awards. in the FT Banker Zambia’ and Bank’ in 2012 in the EMEA Awards Foreign the ‘Best 2012. for Bank’ Awards Global Finance Internet in the ‘Best

5.6.3 Living with HIV Standard Living with HIV programme, the bank’s Through communities and local its own staff helps educate Chartered HIV and AIDS. about preventing member of the is a key Chartered In Nigeria, Standard valuable AIDS, offering Against Coalition Nigeria Business agenda of fighting the disease. the advance to leadership basic facts that its employees receive The bank ensures and strategies peer education about HIV and AIDS, through partners. with community by sharing its resources employees and all direct the bank educates In Zambia, suppliers and wider such as customers, audiences external a highly effective about HIV and AIDS through communities model. education workplace member a key remained Ghana has Chartered Standard on Employee Wellbeing. Coalition of the Ghana Business in many of The Coalition has participated The Ghana team advance to leadership valuable offering programmes, HIV education. 5.6.4 Education in Africa. Chartered Standard for focus is another Education the bank Back Circle, the Global Give through In Kenya, their education girls complete help disadvantaged seeks to girls targets skills. This project and then gain employable at employment them offering Centre, Girls Starehe the from scheme. The bank employees the bank under an internship of a total to on financial literacy lessons also taught have Kenya. school in Western at a girls’ 250 students at the library the bank built an accessible In Zambia, disabled and Kids Community School for Bauleni Street the The bank also renovated underprivileged children. it accessible. make school to In partnership Service, the bank with the Ghana Education the Schools Desk Project, deliver which is to continues for experience enhancing the classroom to committed Under the second in the country. areas in deprived students 6,600 dual bank has distributed the phase of this initiative a over the country schools across 66 deprived desks to period. three-year 6/Standard Chartered’s impact on Nigeria

Standard Chartered Nigeria is the bank’s largest African franchise

Standard Chartered’s new office in Lagos, Nigeria, meets the highest environmental standards

32 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Nigeria $2.1bn the to added of value in Nigerian economy 2012 4% 8% 41% 31% 14% 13% 12% 16% 26% 25% 43% 53% $1,555 169 million169 $263 billion$263 92.4 million Economy Nigeria Economy 33 The Social and Economic Impact of Standard Chartered in Africa omy 2012 nomy ors of the Nigerian eco at Foreign Direct Investment Exports as GDP % of Imports as GDP % of Agriculture Industry Services consumption Private expenditure Government Real investment Net exports goods of and services Remittances

Official population estimate Size workforce of (2011) Nominal Gross Domestic Product (GDP) GDP per capita asTrade GDP of % Government tax revenues as GDP % of Sectoral breakdown GDP of (2011) Consumption breakdown GDP of (2011) International receipts as GDP % of (2011) Indicator able 4: Key indic A unique feature of Nigeria’s economy is that many ’s A unique feature many developing In vertically integrated. are companies due conglomerates usually become companies countries is this trend shortages, but in Nigeria, skill and finance to many that means The lack of infrastructure pronounced. pump their their own power, generate choose to companies many of the intermediary and manufacture own water of the low reliability because that they require, products their otherwise and logistics would a risk to pose transport developed have linkages fewer Asbusiness. a result sectors in Nigeria than there corporate different between and many of the such as Kenya, countries in other are While such an approach intra-firm. are that do exist linkages in many it results sense in the Nigerian context, makes often expensive that are operations having sub-scale companies of run, which is particularly visible in the veryto high cost in Nigeria. power T Bank of 2008-2012; Central Indicators, Bank Development World Source: 2012 Centre, Trade Nigeria, 2011; International The bank supports of 396,000 jobs, equivalent labour force of Nigeria’s 0.4 per cent Standard Chartered Nigeria supports $2.1 billion Chartered Standard of GDP cent 0.8 per to equivalent of value-added, • •

With a GDP of $263 billion and a population of nearly 170 of nearly With a GDP of $263 billion and a population and in Africa economy largest million, Nigeria is the second of is in the process populous nation. The country the most up-to-date using more of its economy the size recalculating its GDP by increase to is expected which measurements, per cent, about $400 40-60 bringing it to approximately economy). largest the region’s with South Africa, billion (level on oil has been dependent the Nigerian economy Traditionally areas but other of GDP, a third up over which make exports, have sector the telecoms and such as wholesale and retail driving decade, the past over rate at a faster been growing diversification. economic increasing beginning are decade the last made over reforms Economic and better stability political with greater results, deliver to delivering management and macroeconomic governance years. in recent a year 7 per cent averaging GDP growth its banking reform to important steps Nigeria has taken fuel subsidies and is beginning partiallysystem, removed of oil the distribution over disputes regional resolve to its infrastructure now improving is The country revenues. partnerships. Nigeria’s Although public-private through by the global financial crisis, affected financial sector was the industry stabilise quickly to Bank moved the Central banks. failing and recapitalise restructure to with measures important challenges. Income faces Nigeria still However, with the richest issue, and growing inequality is a large than more of the population accumulating 10 per cent a also has The country income. of the total 40 per cent with 50 million young unemployment problem, significant in the human in work. 153rd people not Nigeria comes educational which measures ranking, indicator development is also The country expectancyattainment, and income. life complexity, economic to when it comes 121st just ranked dependent on natural that are countries other similar to has diversification that economic which suggests resources, go. further to 6.1 The Nigerian economy Standard Chartered’s impact on Nigeria continued

As Exhibit 15 shows, Nigeria has experienced rapid GDP growth throughout the past decade and, unlike most 40% countries around the world, did not experience a recession of Nigeria’s GDP stems during the global financial crisis of 2008–2009, mainly from exports thanks to the Government’s macroeconomic and financial reforms. Recent economic growth has been largely driven by non-oil sectors.

Paper manufacturer Veepee Industries is one company that has been helped by Standard Chartered’s financing

Exhibit 16 shows that in terms of international trade, Nigeria’s imports and exports have been relatively stable over the past decade with a current account surplus throughout that period. But with oil production suffering from theft and price volatility, imports are growing at a faster rate, thereby decreasing the current account surplus.

24 World Bank Development Indicators

34 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Nigeria FDI Overview, Nigeria http://www.corporate- nigeria.com/index/ fdi/foreign_direct_ investment_overview. html Development World Indicators 25 26 , 25 35 The Social and Economic Impact of Standard Chartered in Africa concentrated in the oil and gas sector. As the graph shows, As the graph and gas sector. in the oil concentrated 2000 and 2008 but has since FDI doubled between down. slowed Nigerian businesses consider their biggest obstacle to be be to obstacle their biggest consider Nigerian businesses and finance to by access electricity, followed to access the Survey the Enterprise from to according transportation, Bank). (part of the World Corporation Finance International as the problems, biggest the country’s This highlights one of half least At many years. sector has been in crisis for power the grid, while the no connection to of Nigerians have 155kWh a is just per head consumption power average Although Nigeria is the in the world. lowest among the year, electricity its per capita oil producer, fifth-largest world’s that and 3 per cent that of Brazil, is 7 per cent consumption of South Africa’s. investment direct Exhibit amount of foreign 17 shows the (GFCF). formation capital fixed Nigeria, and the gross to owned by assets of fixed the value how This indicates time or how over and households has increased businesses than rather is invested added in the economy new value below the is well of 14 per cent The GFCF figure consumed. Africa. Sub-Saharan for cent of 21 per average direct amount of foreign the largest Nigeria receives countries (FDI) among the African investment 4% 5% 2% in % in % 15% 27% 10% 10% 29% 49% 48% y and China Main origin Main origin China India Africa Europe India Africa Rest the of World Rest the of World Europe 1% 1% 6% 3% in % in % 13% 95% 34% 46% tner ar ade p t main commodi by ade flows tr MERCHANDISE EXPORTS MERCHANDISE Main commodity MERCHANDISE IMPORTS MERCHANDISE Main commodity r able 5: t Agriculture Agriculture Industry Services Extraction Extraction Industry Services Source: International Trade Centre, 2012 Centre, Trade International Source:

T Table 5 shows the importance of oil revenues for the for of oil revenues 5 shows the importance Table 95 per for sector accounting with the extraction country, are exports remaining while the bulk of of exports, cent The country and travel. services transportation such as up nearly goods, which make mainly imports manufactured up a make half of all imports, ironically, while oil products, plans for are imports. There of total percentage growing this. combat try to to refinery a large-scale with deal to sector has struggled agricultural The country’s also growing. imports are population, so food a growing of than 1 per cent Nigeria now spends $2.8 billion (more banning imports imports of despite GDP) annually on food pork, and cocoa. beef, such as rice, products partner trading that Nigeria is an important the fact Despite these countries to exports countries, African West for Imports exports. of its total only about 10 per cent represent less representing limited, are countries African other from Nigerian imports. of total per cent than five Standard Chartered’s impact on Nigeria continued

6.2 Nigeria’s financial sector

Nigeria has built a relatively well-developed and stable financial system as a result of significant reforms undertaken over the past decade. The system is dominated by commercial banks, which control more than 90 per cent of all financial assets. There are 20 commercial banks in the country, of which the largest six hold more than 60 per cent of all bank assets. Unlike in many other developing countries, foreign banks are relatively small players, with 10 per cent of total banking assets. Banking is by far the most developed part of Nigeria’s financial infrastructure. The stock market’s capitalisation is small (12 per cent of GDP) and concentrated (the largest company represents 25 per cent of the total), while only a handful of new firms have listed since the financial crisis. Similarly, the insurance sector is tiny and stagnant at less than one per cent of GDP. According to the International Monetary Fund, the Nigerian banking system is well capitalised, liquid and profitable and able to withstand systemic shocks. However, some banks were under pressure during the 2008–2009 financial crisis, and the Central Bank of Nigeria intervened to inject liquidity into the system With the deployment of its ATMs around the country, Standard Chartered has helped to transform retail banking in Nigeria and to replace bank management in ten cases. The bank has made a number of regulatory changes since the financial crisis aimed at strengthening the financial system. 6.3 Standard Chartered’s activities in Nigeria Table 6 shows that just 8 per cent of loans are for Nigeria is Standard Chartered’s largest franchise in Africa by retail customers, illustrating the banking system’s revenues. The bank began its Nigeria operations in 1894 as commercial focus. the Bank of British West Africa Limited, which merged with the of South Africa in 1965. The name was Table 6: Sectoral distribution of domestic and foreign loan amounts then changed to the Standard Bank of West Africa. Four years after the merger, Standard Bank Nigeria (later Sector Gross loans in $ million % of total renamed ) was incorporated locally Agriculture 3,624 4% to take over the business in Nigeria. Standard Chartered Mining & Quarrying 18,326 22% remained a shareholder in First Bank of Nigeria until 1996, Manufacturing 14,909 18% when it disposed of its shares. The bank re-entered Nigeria Utilities 932 1% in 1999 as a wholly owned subsidiary of Standard Building & Construction 0 0% Chartered Plc. Transport & Communication 17,912 21% Wholesale & Retail 11,182 13% Standard Chartered Nigeria has approximately 56,000 Tourism, Restaurants, Hotels 0 0% retail customers, 9,000 SME clients and more than 700 Real Estate 6,419 8% wholesale clients. Although wholesale banking is still the Financial Services 4,245 5% largest business, it is increasing its retail and SME financing Personal/Household 7,040 8% considerably. The bank currently operates 40 branches. The Total 84,589 100% bank’s share of the domestic market is about 2 per cent. Source: Central Bank of Nigeria, 2011 The bank currently employs some 825 people, and has an additional 250 contract staff.

36 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Nigeria This is in line with what expect given one would assets that the bank’s of up 2 per cent make and assets country total to credit private the total is 21 GDP ratio domestic per cent. This suggests Chartered’s that Standard be of GDP would share 0.5 per cent. When only the local counting impactfinance the share is 0.6 per cent 27 396,000 with associated jobs are financing the bank’s activities 37 The Social and Economic Impact of Standard Chartered in Africa With a fast growing middle class with increased disposable income, disposable income, increased with middle class growing With a fast bright looking very in Nigeria are retailers prospects for

, while 27 396,000 jobs are related to the bank’s activities, equal to 0.4 activities, equal to the bank’s to related 396,000 jobs are figures These relative of the Nigerian labour force. per cent and Ghana, Zambia with Kenya, smaller compared are in Nigeria, due to share smaller market the bank’s reflecting nationalisation. The since in the country history its shorter by the bank’s added supported value why the relative reason employment activities is higher than the amount of relative are lends to Chartered Standard that is that the businesses Nigerian firm, generating than the average productive more labour. added with less value more the bank’s impactExhibit 18 shows the economic from with impactactivities associated in Nigeria, a split between its own and impact finance, from and trade finance general loan shows, the bank’s While, as the exhibit operations. finance, and trade general between portfolio is split evenly finance Trade is slightly larger. finance trade the impact from general but for goods and servicessupports directly, tradable value-added which output, to and therefore extent the finance of the intensity depends on the capital supported, impact are also supports finance Trade financed. that are companies the This is due to finance. jobs than general more marginally and trading. of transport nature labour-intensive

6.4.1 Total impact 6.4.1 Total Nigeria and its lending to in operations Chartered’s Standard and individuals support employment and addcompanies loan portfolio was The outstanding the country. across value worth $2.2 billion at the end of 2012, with 79 per cent over In 2012, internationally. and the rest locally, financed the to billion of value added $2.1 Chartered Standard of GDP 0.8 per cent representing Nigerian economy, 6.4 Impact growth on in Nigeria and jobs Standard Chartered Nigeria is seen as a ‘bankers’ bank’ that Chartered Standard deals international and highly structured provide is able to base. The and deep skill presence its international due to local for training provide to with PwC bank has partnered accounting and management financial basic in entrepreneurs stronger. their businesses make to to contribute expertise skills and international The bank’s financial sector. of the Nigerian development the overall for session a training in 2012 it organised example, For Bank of Nigeria on derivative officials of the Central 25 top and risk management. products The bank also worked policy in drafting Bank of Nigeria closely with the Central banks as part of a working for guidelines on derivatives development. on new product group Standard Chartered’s impact on Nigeria continued

As well as its lending activities, Standard Chartered’s own Table 7: Value added associated with Standard operations have an economic impact through activities such Chartered Nigeria by component $122m as employing workers and managers, paying salaries and (in $ million) economic impact from taxes, generating local profits and procuring goods and the bank’s own operations % of total services from local suppliers. This effect is worth $122 Component Value added value added million to Nigeria’s economy, over two-thirds of which is Household income $1,100 million 54% generated directly, reflecting the fact that banks require little Profits and savings $552 million 27% in terms of goods and services to run their operations. Tax income $401 million 20% Exhibit 19 shows how value added is created and how the 6.4.2 Impact per economic sector bank supports employment. While most value added is Exhibit 20 shows the economic sectors on which Standard supported directly by Standard Chartered and its clients, Chartered has the greatest impact. About 38 per cent of most employment is supported indirectly by the suppliers and Standard Chartered Nigeria’s loan portfolio is in manufacturing, suppliers’ suppliers as a result of leverage28 and re-spending but the sector represents just 22 per cent of the value that effects of salaries29. This is in line with what one would the bank adds, because of reliance on imports. Labour is used expect given that Standard Chartered’s direct clients tend more intensively in agriculture and wholesale and trade, which to be more productive than the average Nigerian firm. explains the large employment in these sectors versus a smaller amount of value added. The substantial number of jobs associated with Standard Chartered in the transport sector is due to the large exposure to trading firms where transportation, which is labour intensive, is one of the only activities performed in Nigeria itself. Standard Chartered Nigeria does not have a large exposure to the extraction sector despite its importance to the Nigerian economy, forming only 11 per cent of the bank’s portfolio. Unsurprisingly, the supported employment in that sector is very small relative to the value added.

28 Leverage effects capture the impact related to spending enabled by bank loans/mortgages that individuals obtained as a result of earning salaries from Standard Chartered Table 7 shows the ways through which Standard Chartered’s and its clients and their financing transforms into value added. The bulk of this value suppliers added is in the form of increased salaries and household 29 When salaries are being income. The bank was also responsible for 1.3 per cent of re-spent additional 30 employment is created Nigeria’s total tax revenue in 2012 , with $50 million of which must be counted. the $401 million of tax revenues paid directly by Standard The salaries themselves Chartered Nigeria, mainly in the form of corporate income are included in the direct and indirect impact and tax and payroll taxes withheld on behalf of the bank’s hence there is no employees. equivalent induced value added 30 Total tax revenue in 2012 was NGN 5 trillion or $32 billion (Source: Federal Inland Revenue Service, Nigeria)

Lagos is the financial capital of the most populous nation on the continent

38 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Nigeria 0.4% of Nigerian labour force with Standard associated financing Chartered’s activities 39 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered has helped Soul Mate, a Nigerian hair care a Nigerian hair care has helped Soul Mate, Chartered Standard its business grow to product provider,

By comparing the two horizontal bars from Exhibit 20 we Exhibit 20 we bars from horizontal the two By comparing which shows the quality added per job, the value see can in Chartered with Standard of employment associated sectors. various the surprisingly, This is also shown in Exhibit 21. Not the itself have Chartered sector and Standard extraction very capital- as these are added per job, value most in the supported activities.jobs that are The intensive much less sectors are and wholesale and retail agricultural and wholesale and retail Although agriculture productive. Chartered’s Standard added per job, value the lowest have the for the average this sector is close to added for value of the as in the rest whole of Nigeria. This is noteworthy, below the Nigerian average, well these sectors are country with the more and shows that the bank is associated sector. in each companies productive Standard Chartered’s impact on Nigeria continued

Exhibit 22 Pathways of how Standard Chartered Nigeria’s finance (coloured) helps create intermediate demand (green) and ultimately value added (light blue). Size of bubbles indicates value added supported in sector. Small intermediary demand and within each sector demand are not shown for clarity.

Exhibit 22 shows the ripple effects through which Standard Chartered adds value in Nigeria. Starting from the left, the dark blue lines indicate the loans that Standard Chartered Nigeria provides to companies, grouped in sectors. These companies then generate household income, profits and taxes directly, which is shown by light blue lines, or indirectly through purchases from companies in the same or other sectors, indicated by green lines. A striking feature of this diagram is the weak links between the various sectors, especially the weak links within the manufacturing sector, compared with companies in Kenya in Section 8.4. This shows the limited complexity of the Nigerian economy. Rather than inter-linkages between sectors, many companies in Nigeria are vertically integrated, resulting in strong intra-firm links as shown in the case study below on Parco Group. Although from a company point of view, vertical integration reduces operational risk, the sub-scale and complex operations that come with this type of growth are holding back Nigeria’s economy. Economic complexity is a good indicator for future growth at country level, but complexity within a firm can lead to below-potential growth.

40 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Nigeria 41 The Social and Economic Impact of Standard Chartered in Africa Within the manufacturing sector, little of Standard little of Standard sector, Within the manufacturing because added value into is converted finance Chartered’s and equipment. materials the sector imports of its raw most the bank’s from added comes value The manufacturing the their suppliers, which illustrates from clients and not hand, the links On the other complexity. economic limited developed more are and agriculture manufacturing between all value nearly sector, In the extraction than in Kenya. in the services whereas of profits, in the form added comes of salaries. added is in the form of the value sector most very little Nigeria finances Chartered And although Standard sectors (notably other because directly, agriculture inputs, the agricultural agricultural source manufacturing) in the form added, mostly value indirect sector creates of salaries.

Standard Chartered’s impact on Nigeria continued

6.4.3 Impact per customer segment 6.5 Impact on trade As described above, wholesale banking accounts for the 2.3% majority of Standard Chartered’s business in Nigeria. This is Nigeria has a positive trade balance, mostly due to the of total Nigerian imports different from the other countries in this report, reflecting revenues from oil exports. Most of these exports are not supported by the bank if letters of credit in part the much shorter history of local operations. supported by trade finance, and Standard Chartered’s share of exports that are supported is smaller in both absolute confirmations are Exhibit 23 shows how Standard Chartered supports value included and relative terms compared to imports. This is shown in added and jobs by type of company. The bank supports most Exhibit 24: Standard Chartered’s $318 million contribution value added and jobs through its financing of local corporates, to exports is equivalent to 0.3% of Nigeria’s total exports traders and agricultural businesses, global corporates and whereas the supported imports worth $1,058 corresponds financial institutions. The bank’s impact on small businesses is to 1.6% of the country’s total imports. small when compared with Kenya and Zambia. Apart from the small size of the current portfolio, this is explained by the When letter of credit confirmations31 are included, the fact that Nigerian SMEs are bigger and have better access bank’s share of supported imports increases by $407 million to capital than in other countries. Standard Chartered’s to 2.3 per cent of total Nigerian imports. Although no exact strategy is to increase its exposure to SMEs, which have figures are available, it is estimated that about 75 per cent the largest marginal impact. of Africa’s trade is facilitated by trade finance, so Standard Chartered’s share of that is larger than its 2 per cent market share in the banking sector.

31 Letters of credit issued by other Nigerian banks confirmed by Standard Chartered branches outside Nigeria 32 Central Bank Nigeria 2012 data

42 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Nigeria 43

Africa The Social and Economic Impact of Standard Chartered in Parco Group – A trader becomes a manufacturer Parco Group – in Nigeria since the 1960s and has been operating in established (PG) was Group Parco industrial bicycle trading parts into by trading evolving started the 1970s. Parco gases chemicals, industrial manufacture to then started The company and steel. chemicals in bars, a product reinforcing into steel converting scrap into and moved and flat glass, the competition, in Nigeria. With increasing share market which it has about 25 per cent several exploring is now and the company tighter is becoming steel availability of scrap Currently, generation. power into has also moved company The ore. mine iron options to the grid. into of which is being fed most capacity is 102 MW, base generating its installed of cent (about 20 per 750 MW capacity to its generating increase PG has plans to $600 million was base). Its 2012 revenue capacity installed generating power Nigeria’s and it employed 3,000 people. financing imports, local PG with $60 million for Nigeria has supported Chartered Standard imports as in Dubai, $90 million for as well loans and guarantees, term capital, working Nigeria Chartered PG acknowledged that the partnershipStandard with and overdraft. dollar for possibilities better products, customised through helped the company trading environments. difficult financing,expertisePG overcome which helped and of institutions, a wide array with equity from and debt is mainly financed Manufacturing Institutions. Finance including Development African West other into expand PG to Nigeria is also assisting Chartered Standard bank as by seeking clients of the has operations, Chartered Standard where countries PG products. and buyers for distributors potential tandard Chartered has an impact on Nigeria’s financial sector has an impact Chartered on Nigeria’s tandard S  programmes and training recruitment its employee through

Exhibit 25 analyses the trade supported by the bank by by the bank supported Exhibit 25 analyses the trade with is associated Nigeria Chartered Standard corridor. trade and 4 per cent India of all Nigerian imports from 7 per cent This emphasises countries. African other of imports from act enables it to as global presence and local how the bank’s an efficient intermediary. 7/Standard Chartered’s impact on Zambia

With 15 per cent of the nation’s banking assets, Standard Chartered is an important financial player in Zambia

Standard Chartered’s expertise in agricultural financing is helping Zambeef to expand overseas

44 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Zambia Upper middle income Upper middle income is defined as a Gross per National Income of $4,086 capita of Map An Enterprise John Sutton Zambia, and Gillian Langmead, Growth International 2013 Centre, http://atlas.media.mit. edu/rankings Bank of Zambia (BOZ) (BOZ) Bank of Zambia Annual Report South Africa Excluding Bank Development World 2012 Indicators, 35 36 37 33 34 80% GDP rise in Zambia’s 2000 since per head 4% 17% 47% 37% 18% 43% 43% 10% 23% 20% 49% 0.4% $1,469 14 million14 $21 billion$21 5.4 million Economy Zambia try) omy 2012 nomy ambian eco 45 The Social and Economic Impact of Standard Chartered in Africa ors of the z at many of the leading firms in the country firms in the country many of the leading 36 in the world, reflecting its dependence on its dependence reflecting in the world, 37 Key indic in indus (mining is included Exports as GDP % of Imports as GDP % of Agriculture Industry Services consumption Private expenditure Government Real investment Net exports goods of and services Remittances Foreign Direct Investment (2011) Official population estimate Size workforce of Nominal Gross Domestic Product (GDP) GDP per capita Trade asTrade GDP of % Government tax revenues as GDP % of Sectoral breakdown GDP of (2011) Consumption breakdown GDP of (2011) International receipts as GDP % of (2011) Indicator able 8:  copper, but is more or less at par with many other African African at par with many other or less but is more copper, depressed to is vulnerable The country countries. of public income. as a source and royalties prices commodity were set up by long-standing trading companies. The companies. trading up by long-standing set were plays a manufacturers becoming phenomenon of traders in Sub-Saharan but elsewhere only in Zambia not role key for of trade the relevance and underscores Africa economic development. 105th for ranks Zambia complexity Source: World Bank Development Indicators, 2011-2012; Bank of Zambia, 2011-2012; Bank of Zambia, Indicators, Bank Development World Source: Survey, 2012 Labour Force 2012; Zambia Enterprise Centre’s Growth the International to According of Zambia, Map T . Poverty 35 . 34 . Drivers for this growth this growth for . Drivers 33 The bank supports 147,000 jobs, equivalent to The bank supports to 147,000 jobs, equivalent labour force. of Zambia’s 2.7 per cent Standard Chartered Zambia supports Zambia $953 million of Chartered Standard of GDP 4.6 per cent to equivalent value-added, remains a problem, and Zambia ranks just 163rd in the world 163rd just ranks and Zambia a problem, remains indicating Indicator, the Human Development to according better into feed to yet have improvements that economic its population. for conditions

• • The Zambian economy has experienced rapid growth over growth rapid has experienced economy The Zambian billion between $21 to doubling its GDP decade, the past 6.8 per cent, was 2000 and 2012. In 2011, GDP growth in 2012 7.3 per cent rising to 7.1 The Zambian economy include rising copper output, higher copper prices, improved output, improved prices, include rising copper copper higher spending on and government productivity, agricultural Zambia’s capacity. generation power and local infrastructure 2000 to since has risen by 80 per cent GDP per head 8), which is slightly higher than $1,469 in 2012 (see Table Africa in Sub-Saharan the average Zambia’s economy has traditionally been characterised by its been characterised has traditionally economy Zambia’s which of copper, and export on the production dependence changes. price volatility through economic it to exposes has prioritised diversifyingAlthough the country its economy has continued. on copper this dependence years, in recent 10 per cent with the richest issue inequality is a large Wealth of the total 47 per cent of the population accumulating it will and poverty rates, economic growth current At income. middle upper reach to 28 years an estimated Zambia take Bank as defined by the World status income Standard Chartered’s impact on Zambia continued

60% increase in the value of exports as a percentage of GDP in the last decade

The value of exports as a percentage of GDP has increased over the past decade by almost 60 per cent, and now Zambia’s exports are concentrated in terms of both the comprises nearly half of national income. At the same time, products and the firms involved. The most important export the share of imports decreased from 40 per cent of GDP product for the nation is copper, which accounted for about in 2000 to 37 per cent in 2011 . The growth in export three-quarters of Zambia’s export earnings in 201139. value was partly related to increasing commodity prices About 15 firms account for over 80 per cent of Zambia’s worldwide, and could reduce if commodity prices maintain export earnings. While Kenya mostly imports from outside their downward trajectory. Other sources of export Africa and then exports its product to other African revenue, however, include manufactured goods such as countries, for Zambia the situation is reversed. This is metals and related products, chemicals, textile fibres and because Zambia’s demand for gold content and cobalt ores tobacco. Zambia now runs a current account surplus to be further processed and/or exported can be supplied by because of the opposite paths of imports and exports. Africa’s well-developed mining sector in South Africa and the Democratic Republic of Congo, while the country’s mining exports go to Europe and China.

38 Source: World Bank Development Indicators 39 An Enterprise Map of Zambia, John Sutton and Gillian Langmead, International Growth Centre, 2013

46 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Zambia IFC Enterprise SurveysIFC Enterprise http://www. enterprisesurveys.org/ Data/ExploreEconomies/ 2007/Zambia 40 47 The Social and Economic Impact of Standard Chartered in Africa Exhibit 28 shows Zambia’s gross fixed capital formation, formation, capital fixed gross Exhibit 28 shows Zambia’s physical accumulates at which the country which is the rate (FDI) inflows investment direct foreign as net as well assets, at is healthy formation capital domestic While Zambia. to in the largely FDI is Zambia’s of GDP, a quarter nearly diversify needs to the nature The country sector. extraction their of its FDI and import increase technology and skills to income. productivity and per capita 1% 4% 3% in % in % 19% 10% 10% 57% 20% 29% 48% of the 40 y and Main origin Main origin China India Europe Rest the of World China India Africa Africa Europe Rest the of World 6% 4% 2% in % in % 11% 15% 65% 75% 22% tner ar ade p t main commodi by ade flows tr MERCHANDISE EXPORTS MERCHANDISE Main commodity MERCHANDISE IMPORTS MERCHANDISE Main commodity r able 9: t Agriculture Agriculture Extraction Extraction Industry Industry Services Services International Finance Corporation (part of the World Bank Bank (part of the World Corporation Finance International are in Zambia doing business to the major obstacles Group), in the of companies by the practices followed rates, high tax finance. to sector and access informal

Source: Bank of Zambia, 2012; International Trade Centre, 2012 Centre, Trade 2012; International Bank of Zambia, Source: it does is strong, performance economic While Zambia’s Survey the Enterprise to challenges. According face T Standard Chartered’s impact on Zambia continued

$953m 7.2 Zambia’s financial sector 7.3 Standard Chartered’s activities in Zambia Zambia has a small financial sector and financial Standard Chartered Bank Zambia is a public company that of value added supported by Standard Chartered intermediation remains low as a share of GDP. Domestic was incorporated in 1971 when it took over the business of in Zambia credit to the private sector is 19 per cent, which is lower Standard Bank Limited, which had operated in Zambia since than Nigeria and Kenya but comparable to countries such 1906, making it the oldest financial institution in the as Uganda and Tanzania. The country has 19 commercial country. Standard Chartered is the only international bank banks, 13 of which are foreign-owned, two partially listed on the local stock exchange. The bank is present in six government-owned and four locally-owned. The single of Zambia’s ten provinces with 24 branches in Southern, largest bank remains the Zambia National Lusaka, Western, North Western, Northern and Copperbelt (Zanaco). In terms of asset and deposit size, the banking provinces and employs over 700 people. The bank’s market sector is dominated by Standard Chartered, Zanaco, share is 15 per cent of banking assets. Barclays and Stanbic, which account for about 62 per cent In 2012, the bank’s wholesale banking business grew its of the banking sector’s total assets and liabilities, onshore investment securities and customer loan book by respectively. In terms of profitability, Standard Chartered 16 per cent and 10 per cent respectively, achieving revenue accounts for the largest proportion of industry profitability growth of 29 per cent. Wholesale banking continues to play at 29.5 per cent, compared with Zanaco at 19.1 per cent, a significant role in the mining and agricultural sector and is Barclays Bank at 18.1 per cent, at 12.7 per increasing its focus in government and energy sectors. cent and at 10 per cent. All banks meet the local minimum capital requirements and the sector is adequately Standard Chartered in Zambia is as much a retail bank as capitalised. The Central Bank of Zambia has developed a a corporate one. It serves approximately 100,000 retail credit bureau and financial constraint may be eased by the customers, 8,000 SME clients and 300 wholesale clients, provision of more information about borrowers. Access to including many of the country’s largest businesses. The focus finance is becoming cheaper, which could fuel economic is to remain the market leader by providing exceptional growth. The commercial banks have decreased their customer service and being the main digital bank. average nominal lending rate which was 16.1 per cent at the end of 2012, compared with 23.6 per cent 12 months earlier41. Zambia issued its first Eurobond in 2012, 7.4 Impact on growth and jobs in Zambia reflecting its strong growth. The proceeds of this are being used for capital spending. On 31 December 2012, 23 per cent of the bank’s total exposure was to consumer finance, comprising retail and Table 10: Sectoral distribution of domestic and SME clients, and 76 per cent was to wholesale clients. The foreign loan amounts remaining 1 per cent of the loan portfolio was exposed to financial institutions. While Standard Chartered is often Sector Gross loans in $ million % of total perceived as a bank supporting multinational companies, Agriculture 1,371 23% only some 30 per cent of its finance is provided to global Mining & Quarrying 344 6% corporates. Slightly more of the finance provided by Manufacturing 685 11% Standard Chartered (which includes international finance) Utilities 124 2% is trade finance than general finance, split 53 per cent and Building & Construction 226 4% Transport & Communication 277 5% 47 per cent respectively. The bank’s quantified economic 41 Bank of Zambia Annual impact on Zambia is shown below. Report Wholesale & Retail 381 6% Tourism, Restaurants, Hotels 118 2% 42 7.4.1 Total impact This is in line with what Real Estate 146 2% one would expect given Financial Services 113 2% Through its financing and operations Standard Chartered that the bank’s assets Zambia supports a total of $953 million in value added. This make up 15 per cent of Personal/Household 2,305 38% is equal to 4.6 per cent of GDP, of which the local finance total banking sector Total 6,090 100% assets and the total contribution is about 2.4 per cent42. Total employment private credit to domestic Source: Bank of Zambia, 2011-2012 related to the bank’s activities is 147,000 jobs, or nearly GDP ratio is 19 per cent. This suggests that 2.7 per cent of Zambia’s total labour force. The reason the Standard Chartered’s is supported value added is relatively more than the supported associated with 2.9 per employment is because the bank lends to the more cent of GDP productive businesses in Zambia, which generate more value added with relatively little labour.

48 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Zambia

2.7% labour force of Zambia’s by Standard supported Chartered

13% 59% 28% % of total value added ard

Value added $123 million $123 $269 million$269 $560 million nent compo ambia by 49 The Social and Economic Impact of Standard Chartered in Africa tered z d ed with Stan at added associ alue V Char (in $ million) Household income Household Profits and savings Tax incomeTax Component able 11:  Of the total value added, most accrues to households, with to accrues added, most value Of the total than half of that and taxes and savings being less profits 11. The $123 in Table as indicated half again of profits, Chartered by Standard supported revenues million of tax income. tax government of total 3.5 per cent is equal to T Exhibit 30 breaks down the total value added and added value down the total Exhibit 30 breaks impact. and indirect of direct employment in terms of Most and Chartered Standard to related added is directly the value related of the employment is indirectly its clients and most be less to suppliers tend indirect which again shows that including workers labour, efficient than firms that use more half of the total Almost sector. the informal from salaries people re-spending employment arises through money impact) (induced and people borrowing earned spending their those salaries, which increases against effect). (leverage

The economic impact of general and trade finance is finance and trade impact The economic of general split between evenly or less $877 million and is more own operations Zambia’s Chartered Standard these two. support which $52 million added, of $76 million of value Some $30 million of impact from directly. is supported payments by Standard tax direct from comes operations of all tax that about a quarter indicating Zambia, Chartered is paid by finance Chartered’s Standard to payments related 11). the bank itself (see Table support own operations Of these 147,000 jobs, the bank’s about 6,000 jobs, including 706 bank employees with the local Chartered’s Standard from stemming remainder of goods and services and re-spending procurement of salaries. As explained in detail in Chapter 4, Standard Chartered also Chartered 4, Standard in Chapter As in detail explained the consider also to were If we deals. underwrites large value underwritten loans of $75 million, the supported $1,019 million and $66 million to by increase added would 9,500 jobs by increase would the employment supported the through Chartered with Standard impact associated financing it actually provided. added and employment value Exhibit 29 depicts the total and international local Zambia’s Chartered Standard to related and own operations. finance trade finance, general Standard Chartered’s impact on Zambia continued

Exhibit 33 Pathways of how Standard Chartered Zambia’s finance (coloured) helps create intermediate demand (green) and ultimately value added (light blue). Size of bubbles indicates value added created in each sector. Small intermediary demand and within sector demand (especially large in manufacturing) are not shown for clarity.

7.4.2 Impact per economic sector Due to its diversified loan portfolio, many sectors benefit from Standard Chartered’s presence in Zambia, as depicted in Exhibit 31. Given the large exposure of the bank to trade finance, it is not surprising that the single largest sector in terms of associated value added is wholesale and retail. Another large sector in terms of value added is agriculture. Zambia’s substantial commercial agriculture sector is eligible for bank financing.

50 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Zambia 51 The Social and Economic Impact of Standard Chartered in Africa

Comparing the two horizontal bars from Exhibit 31 provides Exhibit 31 provides bars from horizontal the two Comparing employment. the quality While many related of insights into these Chartered, by Standard supported jobs are agriculture capital- added than jobs in more value less jobs generate jobs at the bank sectors such as utilities. Direct intensive added as the bank is paying a of value a lot generate and pays high a profit makes amount of taxes, substantial as a whole, a large In Zambia its skilled workforce. for wages added value average below the Zambian number of jobs are The and wholesale and retail. especially in agriculture per job, finance Chartered with Standard that all jobs associated fact that the bank the fact from stems the average above are firms. and capital-intensive productive more the finances Exhibit 32, shows the quality of employment in various added per added by job. Value of value sectors in terms average, the Zambian employee in all sectors is at or above in is involved Zambia Chartered that Standard illustrating part of the economy. productive financing the more Standard Chartered’s impact on Zambia continued

The pathways through which Standard Chartered influences 7.4.3 Impact per customer segment the Zambian economy are shown in Exhibit 33. The most Exhibit 34 shows Standard Chartered’s impact broken down striking feature is that, due to the labour-intensive nature by various customer segments, while the impact of the of agriculture and wholesale and retail, most finance bank’s operations is omitted. Although only 5 per cent of provided to these sectors translates into household income. Standard Chartered Zambia’s exposure is to SMEs, the Despite Zambia’s relatively low economic complexity, the impact on value added and employment is more than three linkages between the wholesale and retail sector on the one times larger than that. This reflects the fact that Zambian hand and agriculture and manufacturing on the other are SMEs are smaller when compared with SMEs in Kenya and relatively well developed. Nigeria, and more capital-constrained.

Zambia’s substantial commercial agriculture sector generates significant value added

52 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Zambia Central Bank Zambia Bank Zambia Central 2012 data 43 53 The Social and Economic Impact of Standard Chartered in Africa The majority of Zambian imports originate from within from The majority imports of Zambian originate of minerals of this is the trade fraction A significant Africa. play a banks hardly where and South Africa, with the DRC Zambia. from commodity export is the main Copper role. making it the Europe, to is exported The majority of copper Chartered Standard exports. Zambian for main destination exports. Zambian of total supports about 3 per cent compared small contribution Although this is a relatively that note it is important to share, market with the bank’s When exports. in copper role banks play a marginal (87 per cent), the exports from trade the copper excluding is well exports of financing share Chartered’s Standard 10 per cent.above

In Section 3 the relevance of trade to economic economic to of trade In Section the relevance 3 flows the trade In Zambia, discussed. was development of imports 3.9 per cent are Chartered Standard to related the account into Taking of exports. and also 2.2 per cent by banks confirmed by Zambian issued of credit letters and the outside Zambia branches Chartered Standard clients, the impact Zambian on underwritten for loans imports and for 4.1 per cent to increases trade supported exports. for 2.5 per cent to 7.5 Impact on trade 8/Standard Chartered’s impact on Kenya

With over 100 years of experience in Kenya, Standard Chartered is well placed to serve the most sophisticated Sub-Saharan African economy

With one of the largest ports at Mombasa, Kenya is the commercial, logistic and economic hub for East Africa

54 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Kenya http://hdr.undp.org/en/ Development African Country Bank Strategic Kenya Paper http://atlas.media.mit. edu/rankings/ 44 45 46 1% 2% 17% 12% 55% 27% 26% 87% 22% 20% 46% $840 -26% 43 million43 $37 billion$37 11.3 million11.3 Economy Kenya Economy omy 2012 nomy an eco , is higher than most , is higher than most rd ors of the keny 55 The Social and Economic Impact of Standard Chartered in Africa at . The fact that GDP per capita is relatively is relatively that GDP per capita . The fact 46 . Kenya’s economy is more diversified than other than other diversified is more economy . Kenya’s 45 Exports as GDP % of Imports as GDP % of Agriculture Industry Services consumption Private expenditure Government Real investment Net exports goods of and services Remittances Foreign Direct Investment Official population estimate Size workforce of (2011) Nominal Gross Domestic Product (GDP) GDP per capita asTrade GDP of % Government tax revenues as GDP % of Sectoral breakdown GDP of (2011) Consumption breakdown GDP of (2011) International receipts as GDP % of (2011) Indicator able 12: Key indic economies in the region and in terms of economic of economic and in terms in the region economies 73 ranking, Kenya’s complexity, Source: World Bank Development Indicators, 2011-2012; Central Bank of 2011-2012; Central Indicators, Bank Development World Source: 2012 Centre, Trade 2012; International Kenya, the last through has increased in Kenya growth Economic crisis of 2007-2008, the the political despite decade, and public global financial crisis of 2008-2009, droughts lagged it has continuously sector inefficiency. However, rates. growth African Sub-Saharan behind the average ability to sector’s based on the private is largely Growth such as horticulture identify new niche markets and exploit and ICT T low given the country’s level of income and economic and economic of income level the country’s low given higher comparatively a capacity for points to complexity the African to According in Kenya. growth economic needed partnerships are Bank, public-private Development transport as inadequate projects, out infrastructure carry to holding back are infrastructure power and hydroelectric industry, This is particularly true for growth. economic of GDP but has more 17.5 per cent for which accounts potential. African countries African of 145, Kenya is among the higher of 145, Kenya 44 The bank supports 323,000 jobs, equivalent to The bank supports to 323,000 jobs, equivalent labour force of Kenya’s 2.9 per cent supports $2 billion of Kenya Chartered Standard of GDP 5.5 per cent to equivalent value-added, ranked Sub-Saharan African countries, behind Ghana but countries, African Sub-Saharan ranked unequally, is distributed in Kenya of Nigeria. Income ahead by the received income of the total with about 38 per cent of the population. 10 per cent richest • •

Kenya’s economy is among the largest and most complex in complex and most largest is among the economy Kenya’s highly developed the most and certainly Africa Sub-Saharan Community Africa the East in economy market-based domestic 2012 gross With a non-inflation-adjusted (EAC). (GDP) of $37 billion, it is also the economic, product Kenya’s region. hub of the entire and logistical commercial, young, with 70 per cent relatively are 43 million inhabitants enjoys a of the population under the age of 35. Kenya including a well-educated of advantages combination As a tradition. entrepreneurial population and a strong be a to Kenya consider result, multinational companies when investing South Africa to location alternative leading the World to according continent.in the African However, some of $840 in 2012 was per capita GDP Bank, Kenya’s Africa Sub-Saharan for than the average lower 40 per cent and about half of the population South Africa), (excluding below the povertylives a Human Development line. With ranking Indicator 8.1 The Kenyan economy 8.1 The Kenyan Standard Chartered’s impact on Kenya continued

In 2012, economic growth was 4.6 per cent compared with Kenya’s imports have grown four-fold since 2000, from 4.4 per cent in 2011 and 5.8 per cent in 2010. Growth was $4.148 billion in 2000 to $17 billion in 201249. The country mainly driven by financial intermediation (responsible for 6.5 relies on imports of crude oil, accounting for about 21 per per cent of GDP but among the fastest-growing sectors), cent of imports, which is refined for both domestic use and tourism, construction and agriculture. Agriculture, the export. Over a five-year period, the quantity of imported mainstay of Kenya’s economy, recorded suppressed activity in petroleum products grew 19 per cent, from 3.7 million tons 2013 and was further affected by reduced demand for in 2007 to 4.4 million tons in 2011. This is due to higher Kenyan horticultural exports in the European market. Similarly, crude oil prices and the high prices of refined petroleum the tourism, manufacturing and construction sectors did not products in the international markets. Other major imports reach the anticipated growth levels. include manufactured goods, chemicals, machinery and transport equipment. The recent increase in imports is mainly driven by larger volumes and higher prices of oil, machinery, transport equipment and manufactured goods.

Kenya’s overall balance of payment has been negative throughout the last decade. Imports of goods and services have increased more than exports, as shown in Exhibit 38, worsening its current account further. Exhibit 38 provides more detail on Kenya’s imports and exports, by origin and commodity. Kenya imports 90 per cent of goods from markets outside Africa and about half of what it exports goes to other African countries. Imports from Asian countries have increased rapidly in recent years.

47 World Bank Development Indicators 48 49 International Trade Centre, 2012

56 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Kenya African Development Development African Country Bank Strategic Kenya Paper SurveysIFC Enterprise http://www. enterprisesurveys.org Development African Country Bank Strategic Kenya Paper 50 51 52 5.2% lost of annual sales are electrical to year each outages of the International of the International 51 57 The Social and Economic Impact of Standard Chartered in Africa . 52 Finance Corporation (part of The World Bank), the biggest Bank), the biggest (part of The World Corporation Finance rates, tax high are in Kenya businesses for obstacles of the informal and practices finance to by access followed of survey, the same 5.2 per cent to According sector. electrical outages due to lost sales are annual Kenyan globally. with 2.9 per cent compared – the formation capital fixed Exhibit gross 39 shows the foreign added – and net are at which physical assets rate the Throughout Kenya. (FDI) inflows to investment direct 16 from has increased investment overall decade past for This is about average of GDP. 20 per cent to per cent on investment direct foreign The net Africa. Sub-Saharan many other with compared hand is slightly lower the other its position lost has recently Kenya countries. ‘comparable’ which Africa, in East important FDI destination as the most Due to resources. lack of mineral in part Kenya’s reflects its in Kenya, reforms and regulatory slow structural in Kenya overtaken and Uganda have neighbours Tanzania investment, from much of which comes foreign attracting itself Kenya According to the Enterprise Survey the Enterprise to According 1% 2% in % in % 11% 13% 12% 26% 25% 43% 22% 46% y and Main origin Main origin Rest the of World Europe China Africa Europe Rest the of World China India Africa India 4% 5% in % in % 21% 15% 13% 53% 60% 30% tner ar t main commodi by ade flows ade p tr . 50 MERCHANDISE EXPORTS MERCHANDISE Main commodity MERCHANDISE IMPORTS MERCHANDISE Main commodity r able 13: t Services Agriculture Services Extraction Agriculture Extraction Industry Industry Source: International Trade Centre, 2012 Centre, Trade International Source: horticulture (19 per cent), tea goods were The main export raw goods (13 per cent), manufactured (11 per cent), and oil products (4 per cent) coffee (7 per cent), materials play an important commodities Agricultural (1 per cent). prices so world earnings, export total in Kenya’s role half of all exports Almost earnings. export Kenya’s influence nations, mainly Uganda and Tanzania. African other go to Kenyan for has been the driving factor within Africa Trade Kingdom and the Netherlands the United In Europe, exports. Exports to trade. the flower for important destinations are 26 per cent Community represent (EAC) African the East Eastern for Market (Common the COMESA to and exports of total 32 per cent represent region and Southern Africa) exports

T Standard Chartered’s impact on Kenya continued

8.2 Kenya’s financial sector deposit base, and lending portfolio in Kenya Shillings, it offers a variety of local and foreign currency accounts, both 40% Kenya’s financial sector is among the largest and most deposit and loan, to its customers. Standard Chartered ratio of private credit sophisticated in Sub-Saharan Africa and comprises banks, Kenya has a diversified portfolio, cutting across many to GDP insurance companies and securities markets. The ratio of sectors including business services, manufacturing, private credit to GDP, which stands at nearly 40 per cent, is wholesale and retail, transport and communications, real about double the regional average, indicating the important estate, agriculture, energy and water. It hosts a regional role of the financial sector in economic life. Kenya’s banks are Shared Service Centre, supporting Standard Chartered’s relatively well capitalised and profitable, and draw the bulk of technology and operations in Uganda, Tanzania, Zambia, their deposits from small accounts. In Kenya, 65 per cent of Botswana and South Africa on a real-time basis. the population has access to a bank account, significantly Standard Chartered Kenya serves approximately 195,000 above other Sub-Saharan African countries. However, loans retail customers, 15,000 SME clients and more than 4,900 are mainly given to the country’s largest enterprises and the wholesale clients. The bank’s market share in terms of SME sector remains severely under-banked. domestic banking assets is about 9 per cent. The bank Another significant feature of the banking system in Kenya currently employs some 1,900 people. Standard Chartered is the role of foreign banks, which control over 40 per cent Kenya continues to build a sustainable business in Kenya of banking sector assets. Overall, Kenya’s banking sector focusing on high value segments, particularly Priority, SME weathered the global financial crisis of 2008 well. and Wealth Management. Standard Chartered aims to enhance its digital offering to customers, focusing on Table 14 provides a breakdown of bank lending by sector. innovation and increased productivity. The bank sees As can be seen, lending to the wholesale and retail, growth opportunities in financing infrastructure, energy manufacturing, and real estate sectors constitute about and manufacturing as Kenya aims to achieve its Vision 47 per cent of all lending, while loans to households 2030 goals. constitute an additional 25 per cent of lending activity. On 31 December 2012, the reference point for this study, Table 14: Sectoral distribution of domestic and three quarters of Standard Chartered’s loan book was foreign loan amounts wholesale and the rest retail and SME clients. The bank’s

Sector Gross loans in $ million % of total largest exposure is to manufacturing (18 per cent of its loan book), compared with a national figure of 14 per cent. By Agriculture 945 5% financing manufacturing, Standard Chartered supports the Mining & Quarrying 235 1% country’s economic vision53 of adding value by exporting Manufacturing 2,552 14% Utilities 618 3% manufactured goods across the region. Building & Construction 758 4% Through Standard Chartered’s expertise, the bank has Transport & Communication 1,501 8% supported the Kenyan Government in financing Wholesale & Retail 3,754 20% infrastructure and to stabilise its currency, as shown by Tourism, Restaurants, Hotels 476 3% Real Estate 2,462 13% the syndicated loan arranged in May 2012. Financial Services 755 4% Personal/Household 4,772 25% Total 18,827 100% Syndicated loan to Government

Source: Central Bank of Kenya, 2012 of Kenya In May 2012, The Republic of Kenya’s Ministry of Finance signed a $600 million two-year loan. The syndicated loan, 8.3 Standard Chartered’s activities in Kenya Kenya’s first, was underwritten by three banks led by Standard Chartered. The funds are being used to finance infrastructure Standard Chartered Bank Kenya Limited was established in spending and the costs of implementing the Constitution. The 1911 when the first branch opened in Treasury Square, loan eased pressure on domestic interest rates and provided a Mombasa. The bank has about 32,000 local shareholders boost to the international reserves of the central bank, thus holding 26 per cent of the bank’s total shares, and has been stabilising the Kenyan Shilling. 53 Ruwaza ya Kenya 2030; a publicly quoted company on the Nairobi Securities Kenya Vision 2030 Exchange since 1989. While the bank reports its capital,

58 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Kenya This is slightly higher than that the given expected up 9 make assets bank’s country of total per cent and the total assets domestic to credit private is 40 per cent. GDP ratio that This suggests Chartered’s Standard is finance $1,620 local with 3.6 per associated GDP as of Kenya’s cent the 4.4 per opposed to (when found we cent international excluding finance) 54 $2bn supported added of value Chartered by Standard 59 The Social and Economic Impact of Standard Chartered in Africa Agribusinesses large and small, such as Isinya Rose Farm, are are Farm, Rose and small, such as Isinya large Agribusinesses and job creation development economic Kenya’s to central

Standard Chartered Kenya’s loan book is equally split Kenya’s Chartered Standard value more However, finance. and trade general between million compared ($992 finance general to added is related conduct to firms tend the receiving with $887 million), as finance, of trade than the recipients activities in Kenya more sector. in the wholesale and retail many of whom operate with the linkages backward fewer have generally The latter support added value less consequently and economy local itself. in the country support $158 own operations Kenya’s Chartered Standard added, of which $115 million is in the form million in value and the Chartered paid by Standard salaries, taxes of direct The shareholders. local to that accrue of profits 26 per cent Standard from added comes $35 million of value remaining the suppliers and their suppliers through Chartered’s goods and services. of local purchase The total The total 54 employment related to the bank’s activities is 323,000 the bank’s to employment related labour force. total of Kenya’s 2.9 per cent jobs, or nearly being added supported value the relative for The reason the bank employment is because higher than the relative than the productive more that are businesses lends to added with value large firm, generating Kenyan average little labour. relatively Chartered 4, Standard in Chapter In addition, as discussed clients. Kenyan underwritesmillion of loans for $350 added the value These underwritten amounts increase is Standard by $314 million and add 46,000 jobs. This Chartered effect. catalytic Although Standard Chartered’s its underwriting the mobilisation of debt catalysed through the impact only consider below we in the discussion capital, the financing through Chartered with Standard associated directly. it provided

8.4.1 Total impact 8.4.1 Total international and its local Exhibit 40 shows that through Chartered Standard as its own operations, as well finance, supports added, which is $2,038 million of value Kenya GDP. of Kenya’s some 5.5 per cent equal to mpact on growth and jobs in Kenya 8.4 Impact on growth and jobs in Kenya Standard Chartered’s impact on Kenya continued

Exhibit 41 breaks down the total value added and Table 15 reveals that more than half of value added is employment in terms of direct, indirect, leveraged and received by households in the form of salaries, followed by 2.9% induced impact. Most of the value added comes directly profits and savings, and taxes. The total tax income directly of Kenya’s labour force from Standard Chartered and its clients, with a direct and indirectly supported by the bank is significant, making supported by Standard Chartered impact of $1,196 million; and most jobs related to Standard up slightly more than 3.1 per cent of total national tax Chartered’s financing arise indirectly (110,000 jobs). collections. With direct tax payments of $52.5 million, The reason for this is that while all of Standard Chartered’s Standard Chartered Kenya is one of the most important clients operate in the formal sector and tend to be more taxpayers in the country. capital-intensive, their suppliers tend to be less efficient, more labour-intensive firms, which sometimes operate Table 15: Value added associated with Standard in the informal sector. This is most pronounced in the Chartered kenya by component agricultural, manufacturing and wholesale and retail (in $ million) sectors. A smaller amount of value added and employment % of total is supported because of people leveraging themselves Component Value added value added financially against the salaries they earned, either with Household income $1,056 million 52% Standard Chartered or the clients financed by the bank Profits and savings $725 million 36% and their suppliers (leveraged impact55). The induced Tax income $256 million 13% employment (86,000 jobs) is driven by the re-spending of salaries of employees of Standard Chartered and its 8.4.2 Impact per economic sector client firms and their suppliers. Exhibit 42 shows that the largest amount, $502 million, of value added arises in the manufacturing sector, due to Standard Chartered Kenya’s comparatively large exposure to manufacturing. Most of this amount is supported indirectly as many clients source products from this sector, reflecting the relatively complex and diversified nature of Kenya’s economy, which was referred to in Section 8.1. In terms of direct effects, the transport and communications sector benefits most because of the large amount of outstanding loans to transport and trading companies. Furthermore, the majority of retail loans are used for home improvements such as the purchase of electronic devices and furniture, which benefits the wholesale and retail sector. In terms of employment, the impact in the manufacturing sector is again the biggest, due to the large share of SMEs supported in manufacturing. Despite Standard Chartered Kenya’s limited exposure to agriculture and consequently small amount of value added, it supports a substantial number of agricultural jobs due to the relatively low productivity of that sector.

55 Leverage effects capture the impact related to spending enabled by bank loans/mortgages that individuals obtained as results of salaries they earned with Standard Chartered, its clients and their suppliers

60 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Kenya 5.5% GDP of Kenya’s by supported Chartered Standard 61 The Social and Economic Impact of Standard Chartered in Africa Comparing the two horizontal bars from Exhibit42, Exhibit from bars horizontal the two Comparing 43 shows the quality sectors in the various of employment large added per job. Although relatively of value in terms these jobs generate supported, jobs are numbers of farming capital-intensive jobs in more added than value much less added per employee in all sectors is at or sectors. Value that Standard illustrating average, the Kenyan above in financing the more is involved Kenya Chartered In that sense, Standard parteconomy. of the productive the quality of opportunity best increase to Chartered’s productive the less is by pulling broadly employment more the supply chains into parts of the economy and informal of its clients.

The overall value added related to Standard Chartered Chartered Standard to added related value The overall GDP as shown in Exhibit 42. of Kenya’s equals 5.5 per cent that Standard this means down by sector, When broken added in value with 13 per cent is associated Chartered in industry manufacturing, (excluding 17 per cent in services. This underscores cent and 4 per manufacturing) the financing industry for importance Chartered’s Standard of small share Chartered’s Standard and manufacturing. by agriculture, added is explained value agricultural being a capital-extensive farming, especially subsistence sector which Standard the horticulture for except sector, Standard for way In that sense, the best finances. Chartered in the footprint its economic increase to Chartered financing the food be through sector would agriculture demand from create which would industry, processing manufacturing between inter-linkages The weak agriculture. ‘pull’ opportunities to are that there suggest and agriculture demand, as will be shown in Exhibit 44. more Standard Chartered’s impact on Kenya continued

Exhibit 44 Pathways of how Standard Chartered Kenya’s finance (coloured) helps create intermediate demand (green) and ultimately value added (light blue). Size of bubbles indicates value added created in each sector. Small intermediary demand and within sector demand (especially large in manufacturing) are not shown for clarity.

Exhibit 44 shows the pathways through which the bank creates value. Although Standard Chartered Kenya creates value through its own operations, most of the value added comes from the sectors it finances, arising in the sector receiving the finance or in other related sectors because of intermediary demand. Section 8.1 shows that, compared with other Sub-Saharan African economies, Kenya’s economy is well diversified and complex. Exhibit 44 provides visual proof of this with the presence of many inter-linkages between sectors. This is especially true for manufacturing, where much of Standard Chartered Kenya’s capital is converted into value added because many manufacturing sectors source from each other (these intra-linkages are not shown). In contrast, the wholesale and retail sector converts relatively little financing into value added, likely due to large imports. The weak inter-linkage between manufacturing and agriculture is striking and given the importance of both sectors points to substantial potential for value addition, as the case study of Bidco Oil refineries shows.

62 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Kenya 63 The Social and Economic Impact of Standard Chartered in Africa

8.4.3 Impact segment per customer down impact also be broken can total Chartered’s Standard segment, by customer as is shown in Exhibit 45. The figures Chartered the impact of Standard exclude here presented impact and show that the single largest operations Kenya’s The share companies. local to provided finance arises from portfolio is 7 per cent, total Chartered’s in Standard of SMEs banks. Kenyan for average which is below the 17 per cent they of the portfolio, only 7 per cent are Although SMEs added and also 14 per value of related per cent up 14 make less employment. are SMEs This is because of related cent manual labour than other and use more capital-intensive multiplier the SME countries Sub-Saharan firms. In other impact be even can achieved and related of loans provided more comparatively are small businesses higher but Kenyan than finance to access better relatively and have productive in Africa. elsewhere Standard Chartered’s impact on Kenya continued

8.5 Impact on trade

In Section 2, we discussed the relevance of trade for economic development in Africa. Exhibit 46 shows that Standard Chartered finances 6.2 per cent of Kenya’s imports and 2.8 per cent of its exports. Standard Chartered is more involved with imports than exports, reflecting the fact that Kenya imports almost 90 per cent of its goods and services from outside Africa. Kenya has had a negative trade balance already for some time, so the activities of the bank in Kenya mirror the economic structure of this economy. Overall, Kenyan firms import from around the world and transform their imports into exports, half of which go to other African markets. However, it is harder for banks to play a role in intra-African trade because a good portion of that trade is not intermediated.

Standard Chartered has introduced state of the art digital branches to Kenya

56 Central Bank Kenya 2012 data

64 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Kenya 65 The Social and Economic Impact of Standard Chartered in Africa Bidco Oil Refineries links manufacturing to agriculture Bidco Oil Refineries links manufacturing one of the into grown since in 1986 and has began its operations Ltd Oil Refineries Bidco Headquartered region. Africa in the East goods enterprises consumer fast-moving largest Nakuru and in Thika facilities manufacturing has state-of-the-art Bidco Kenya, in Thika, are All plants Tanzania. Dar es Salaam in in Jinja in Uganda and with affiliates in Kenya, standards. world comply with all ISO and energy efficient,green and eco-friendly, and Sudan. Rwanda of Congo, Republic Democratic to exports The company The company farmers. from buys philosophy and oil seeds directly has a soil-to-pan Bidco the quality and quantity of their yield to improve to guides and helps these farmers farmers, than 20,000 registered has more Bidco and livelihoods. their revenues enhance increase aims to actively in its supply chain. Bidco involved than 12,000 are while more future. than 30,000 in the near more to farmer-base the registered their business facilitate with loans to the group has supported Chartered Standard as the capacity and of their plants based in Thika and modernisation as well expansion services such as working other various In addition the bank provides in Kenya. Nakuru derivatives. hedging and commodity exchange and foreign rate interest facilities, capital

Analysing the total related trade flows by trade corridor corridor flows by trade trade related Analysing the total mainly Chartered Standard terms that in absolute reveals such as the USA and with countries trade supports Kenyan category. of the World included in the Rest the Middle East India is especially to in exports role Chartered’s Standard Chartered’s at 25 per cent, Standard which reflects large countries. in both deep presence Taking into account the letters of credit issued by Kenyan by Kenyan issued credit of the letters account into Taking outside Kenya Chartered by Standard banks and confirmed Kenyan by the bank for and the underwritten loans arranged of 7.5 per cent totals impact the on trade customers, of exports. imports and 3.3 per cent 9/Standard Chartered’s impact on Ghana

Standard Chartered is the oldest bank in Ghana, operating for over 117 years

Standard Chartered is an important financier of trade and helps to connect Ghana to world markets

66 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Ghana http://hdr.undp.org/en/ 57 $1.4bn in Ghana added of value by Standard supported Chartered 8% 15% 14% 13% 27% 19% 43% 53% 23% 50% 80% -11% $1,605 $40 billion 25.4 million 10.6 million Economy Ghana n economy ors of the ghanaian economy 67 The Social and Economic Impact of Standard Chartered in Africa at Key indic 2012 Exports as GDP % of Imports as GDP % of Agriculture Industry Services consumption Private expenditure Government Real investment Net exports goods of and services Remittances (2003) Foreign Direct Investment (2011) Official population estimate Size workforce of Nominal Gross Domestic Product (GDP) GDP per capita asTrade GDP of % Government tax revenues as GDP % of Sectoral breakdown GDP of (2011) Consumption breakdown GDP of (2011) International receipts as GDP % of (2011) Indicator able 16:  T 2011-2012; Bank of Ghana, Indicators, Bank Development World Source: 2012 Centre, Trade 2004, 2012; International The growth in GDP decelerated from a record-breaking 15 15 a record-breaking from in GDP decelerated The growth in 2012. 7 per cent sustainable a more in 2011 to per cent Ghana’s spurt due to in 2011 was growth The large while in productive, field becoming Jubilee oil offshore lower. was production cocoa and dropped 2012 oil prices Bank (AfDB), Development Ghana’s the African to According upbeat, GDP outlook remains with projected medium-term in 2014, in 2013 and 8.7 per cent 8 per cent of growth of 6.5 per cent rate growth the average above well both 2000. The AfDB says oil and gas that the period since for and commercial as public infrastructure as well investment this growth. will drive agriculture of 135 puts it 57 The bank supports 283,000 jobs, equivalent to 2.7 per The bank supports to 283,000 jobs, equivalent labour force. of Ghana’s cent supports $1.4 billion of value Chartered Standard of GDP 3.4 per cent to added in Ghana, equivalent among the higher-ranked Sub-Saharan African countries. countries. African Sub-Saharan among the higher-ranked remains wealth countries, Sub-Saharan other Similar to of the population 10 per cent with the richest concentrated income. of the total 33 per cent accumulating

• • In recent years, Ghana has come to be seen by the be seen by the to Ghana has come years, In recent but the Africa’s, just as one of not community international Democratic stories. success great world’s, developing created have changes of government elections and peaceful and by investors favoured stability the macro-economic for widely recognised has been The country entrepreneurs. transitions. democratic its peaceful is on the cusp of what the country prices, lower Despite boom, with new gold supplies resource be a prolonged could oil fields being developed. and new offshore being tapped observedIndeed, Ghana is now being cautiously by many natural the so-called of whether case as a test economists countries resource-rich curse – the tendency for resource be avoided – can growth poor economic from suffer to In this respect,with good governance. Ghana has several world many developing unlike Firstly, advantages. upon a single commodity, that depend heavily economies between diversified well is relatively economy Ghana’s 16). Secondly, industry and services (see Table agriculture, the actions be judged by the voters, can of the government it when transparency greater which should encourage the use of oil revenues. to comes in 2010 figures accounting of Ghana’s The rebasing by about 60 per cent. of the economy the size increased of $1,605 in 2012 Ghana is With a GDP per capita while its country, income as a lower-middle classified ranking Indicator Human Development 9.1 The Ghanaian economy Standard Chartered’s impact on Ghana continued

While in the past Ghana had been lauded for its macroeconomic management, it is now struggling with high fiscal deficits. It should, however, be recognised that high interest rates have induced financial agents to hold government bonds and, perhaps, to reduce their risk exposure to the real sector as a consequence. Containing inflationary pressures and reducing interest rates will remain a challenge even as the country begins to see the dividend from crude oil discoveries. These revenues could strengthen the local currency, eroding the competitiveness of other export-oriented sectors. Although more diversified than other commodity-based economies, Ghana’s economic complexity ranking of 100 is behind countries such as Senegal, Uganda and Kenya, indicating that diversification still has to go further. Oil production caused Ghana’s negative current account to turn positive in 2012 as shown in Exhibit 49. This seems to have been a temporary phenomenon, however, as in 2013 imports surpassed exports again.

Manufacturing companies use Standard Chartered’s finance to expand

68 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Ghana 69 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered employees manage the deposits of over manage the deposits of over employees Chartered Standard 200,000 individuals in Ghana

4% 3% in % in % 17% 35% 33% 10% 34% 10% 22% 30% y and Main origin China Main origin India Africa China Europe Rest the of World India Rest the of World Africa Europe 4% 5% 7% in % in % 14% 25% 54% 70% 20% tner ar ade p t main commodi by ade flows tr MERCHANDISE EXPORTS MERCHANDISE Main commodity MERCHANDISE IMPORTS MERCHANDISE Main commodity r able 17: t Industry Agriculture Extraction Agriculture Services Extraction Industry Services Source: Bank of Ghana, 2012; International Trade Centre, 2012 Centre, Trade Bank of Ghana, 2012; International Source:

T Ghana’s main exports are oil, gold and cocoa, which oil, gold and cocoa, are main exports Ghana’s revenues. of export 80 per cent for account together main imports, the country’s goods (industry)Capital are China and North The America. Europe, from coming to is gold bullion that goes Africa to export large relatively Exhibit 50 shows that the gross refining. for South Africa indicating downward, is trending formation capital fixed than rather consumed added is increasingly that new value this is a oil income of future promise With the invested. has increased investment direct Foreign trend. worrying in new mining and investments large 2005, due to since oil operations. Standard Chartered’s impact on Ghana continued

9.2 Ghana’s financial sector 9.3 Standard Chartered’s activities in Ghana

2.7% Over the past two decades, with solid economic growth on Standard Chartered has been operating in Ghana since of Ghana’s labour force the one hand and liberalisation of the financial sector on the 1896, when it was known as the Bank of British West Africa supported by Standard Chartered other, Ghana has seen a steady increase in the number of (BBWA). In the late 1800s, as the country’s trade with the both foreign and domestic banks operating in the country. world increased, demand for credit rose, but growth was Today, some 26 banks are licensed to trade and market constrained by a lack of capital markets. Recognising this competition has increased dramatically. The increase in gap in the economy, a group of merchants created BBWA, banking activity – particularly the entry of foreign banks – which ultimately became Standard Chartered Ghana in presents challenges to Ghana’s banking regulators, who 1985. As the oldest bank in the country, Standard must work more intensively with colleagues in Africa and Chartered Ghana has continued to operate and lend around the world to ensure the safety and soundness of the throughout Ghana’s various economic cycles, including banking system. In particular, African countries will now during and after the global financial crisis of 2008. The have to give more attention to regional co-operation in bank is 70 per cent owned by Standard Chartered PLC, banking regulation. and the remainder of the stock is owned locally and traded on the . Traditionally, major international banks such as Standard Chartered and Barclays focused much of their lending Standard Chartered serves more than 200,000 retail activity in Ghana on the large corporate sector, while also customers, 18,000 SME clients and close to 500 corporate meeting the needs of a wide range of consumers within clients. The bank provides a wide range of services in the clearly defined risk parameters. While these banks have met consumer and corporate and institutional banking sectors, the needs of small and medium-sized enterprises (SMEs) including comprehensive trade finance (which is discussed in through dedicated teams and to a limited extent, new more detail below), cash management services and foreign market entrants have been much more aggressive in exchange products through its treasury operations. banking to the SME segment. Despite increased competition, Standard Chartered, Barclays and state owned Ghana Commercial Bank (GCB) still hold some 25 per cent 9.4 Impact on growth and jobs in Ghana of total bank assets. According to the Ghana Banking Survey58, in 2012, GCB held 11.0 per cent, with Standard Standard Chartered Group’s total lending in Ghana was Chartered at 8.7 per cent of industry operating assets. $1,232 million at the end of 2012. About two-thirds of this was lent to local corporates and clients in the Ghana’s banking system is strongly influenced by the commodity, trade and agriculture sectors. In terms of government’s macroeconomic policies. High positive real economic sectors the largest exposure was to wholesale interest rates have made it attractive for banks to and retail (39 per cent), manufacturing (26 per cent), accumulate treasury bills and bonds, currently ranging services (15 per cent) and agriculture (10 per cent). between 17.5 per cent and 19 per cent, thereby making interest rates in the loans market even more expensive 9.4.1 Total impact because of the impact of risk premiums. Standard Chartered Ghana supports $1,397 million in value 58 PwC 2013 Ghana added in Ghana, equivalent to 3.4 per cent of GDP59. Total Banking Survey, June These high interest rates may have contributed to an 2013 employment related to the bank’s activities is 283,000 increase in non-performing loans among private sector jobs, about 2.7 per cent of Ghana’s total labour force. The 59 Due to the fact that borrowers. The banking sector’s holdings of government Standard Chartered fact that the bank supports more GDP than employment is Ghana has about 10 per securities have also increased, according to the Bank of explained by the fact that Standard Chartered clients tend cent of total bank assets Ghana, over the past few years. These developments have to be more productive than the average Ghanaian firm. and total private credit raised concerns among business executives that the to domestic GDP ratio is 15 per cent, one would Government could inadvertently crowd out the private suggest a contribution sector with its extensive borrowing requirements, driven of 1.5 per cent. Domestic by persistent fiscal deficits. In the long run, this could have finance makes up 42 per cent of the total Standard severe consequences for the country’s competitiveness, Chartered franchise especially since the budget deficits have historically been exposure in Ghana which as a result of consumption rather than investment. corresponds well with the 3.4 per cent mentioned

70 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Ghana The analysis excludes the The analysis excludes impact of $74.5 million project international finance 60 3.4% GDP of Ghana’s by Standard supported in 2012 Chartered 71 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s own operations in Ghana support own operations Chartered’s Standard added. $74 million of that represents $93 million in value by earned profits payments and local salary and tax direct $19 million of remaining Ghana. The Chartered Standard arises operations own the bank’s to added related value purchases local suppliers (and their suppliers) through from of goods and services. impact of employment in terms Ghana’s Chartered Standard as another includes some 1,000 employees as well with its financing of client companies 282,000 associated associated 283,000 jobs are and their suppliers. In total, in Ghana. Chartered with Standard added and value down the total Exhibit 52 breaks of impact. of rounds employment in terms of While most and Chartered Standard from added arises directly the value impactits clients, a direct jobs of $924 million), most clients’ financing arise from Chartered’s Standard to related This again suppliers (84,000 jobs) or their suppliers’. formal that portfolio clients, which are underlines the fact payments, pay tax overall to more sector firms, contribute firms. than other profits more higher salaries and make access to hand, find it harder suppliers, on the other Indirect their perform labour to use more to tend and finance (the additional leverage to activities. The impact related borrow people being able to from coming consumption (the re-spending effects induced their salaries) and against added graph in the value counted not of salaries, which are smaller. are double counting) avoid to and its own 60 operations. Some 61 per cent of all finance provided by provided of all finance Some 61 per cent operations. Consequently, finance. in Ghana is trade Chartered Standard impact arises from associated the majority of the bank’s with Standard this type of financing, which contrasts The under- countries. in other operations Chartered’s that means of the Ghanaian economy nature financed added value has a larger potentially here provided finance as is shown in and employment impact than elsewhere, than supported and smaller firms are local 2. More Table impact as firms, so the bank has a larger bigger international (and therefore starved of capital more are these companies the majority of impact) and source a higher marginal have their goods and services within Ghana.

In an earlier study in 2010, the authors analysed in 2010, study the In an earlier the in Ghana for Chartered impacteconomic of Standard that study, of with the results 2009. Compared year to related contribution GDP Ghana’s Chartered Standard $400 million from by 75 per cent increased finance local the impact however, terms $700 million. In relative to of Ghanaian GDP in supporting 2.6 per cent from decreased by Ghana’s in 2012. This is explained 1.7 per cent 2009 to than in 2009, larger now being 168 per cent economy exercise of the rebasing is the result extent a large which to local the bank’s to in 2009. The employment impact related as of the labour force) (1.5 per cent stable remained finance show higher labour productivity. official statistics updated also the 2012 study the 2009 study, to In contrast This means quantifies the impact finance. of international Ghana in to contribution total Chartered’s that Standard of of GDP and 2.7 per cent at 3.4 per cent 2012 is larger of which some $600 million of value labour force, the total by international supported added and 120,000 jobs are between on the difference information more For finance. appendix A.3. to refer we studies the two impact economic through also has an Chartered Standard in in detail explained it underwrites,the deals as was 4. The underwritten loans of $50 million support Chapter added and 19,000 jobs, an additional $42 million of value by Standard of GDP supported the share increasing contribution the labour force and cent by 0.1 per Chartered only consider by 0.2 per cent. below we In the discussion the through Chartered with Standard the impact associated directly. financing it provided added and employment value Exhibit 51 depicts the total and local Ghana’s Chartered Standard to related finance and trade general international Standard Chartered’s impact on Ghana continued

9.4.2 Impact per economic sector When analysed by sector, as in Exhibit 53, most of Standard Chartered’s value added in Ghana is in the transport sector. This is due to the intensive use of transport services by the wholesale and retail sector. The manufacturing and service sectors, to which the bank has substantial exposure, also create a lot of value added. In terms of employment, the biggest impact is in the manufacturing sector, due to the large share of labour-intensive SMEs in this sector. The diagrams also illustrate the labour intensity of the agricultural and wholesale and retail sectors, which support relatively more employment than value added.

As shown in Table 18, most of the value added comes in the form of salary income to private households, followed by taxes and then profits. Tax revenue associated with Standard Chartered and its clients and their value chains account for 5 per cent of national tax collections. Standard Chartered’s direct tax payments of $23.7 million represent 0.4 per cent of all Ghanaian tax revenues.

Table 18: Value added associated with Standard Chartered ghana by component (in $ million)

% of total Component Value added value added Household income $822 million 59% Profits and savings $280 million 20% Tax income $294 million 21%

Comparing the two horizontal bars from Exhibit 53 provides insights into the quality of related employment. The graph suggests a trade-off between financing that supports a large amount of jobs, in the labour-intensive manufacturing, wholesale and retail and agricultural sectors, and financing that supports fewer jobs of higher quality in more capital- intensive sectors.

72 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Ghana 5% in revenues of tax Ghana paid by Standard and its Chartered clients including their chains value 73 The Social and Economic Impact of Standard Chartered in Africa The ripple effects of Standard Chartered’s financing in Ghana Chartered’s Standard of The ripple effects household incomes is increasing

Exhibit 55 depicts the pathways through which Standard which Standard Exhibit 55 depicts through the pathways Although the Ghanaian economy. is affecting Chartered its own through value creates Chartered Standard the from added comes of the value most operations, by the added arises directly This value sectors it finances. sectors related or in other the finance sector receiving an complex demand. The more of intermediary because rather other each from sectors source the more economy, economy, in a complex Consequently, abroad. than from and the financing locally added is generated value more impact. with overall When compared has a larger provided is less complexity in this report, countries Ghana’s the other The intermediary Zambia’s. and similar to than Kenya’s sector is by the wholesale and retail transport demand for impact economic in this sector indirect large causing large, to small exposure relatively Chartered’s Standard despite in connected is also well Agriculture the sector itself. the economy. Standard Chartered’s impact on Ghana continued

Exhibit 55 Pathway of how Standard Chartered Ghana’s finance (coloured) helps create intermediate demand (green) and ultimately value added (light blue). Size of bubbles indicates value added created in sector. Small intermediary demand and within each sector demand (especially large in manufacturing) are not shown for clarity.

9.4.3 Impact per customer segment Standard Chartered’s total impact can also be broken down by customer segments, as shown in Exhibit 56. The figures presented here exclude the impact of Standard Chartered’s operations in Ghana. The single largest impact, as one would expect given the portfolio (see Exhibit 4), arises from finance provided to commodity traders, representing 38 per cent of the bank’s total lending. Even though the SMEs share in the total portfolio is rather small at 4 per cent, the overall contribution to total related value added impact is 11 per cent. The reason for this is that the effect of finance provided to SMEs is large as many are more starved of capital than companies in the other segments.

9.5 Impact on trade

In Ghana, Standard Chartered supports 2.3 per cent of Ghana’s trade, 2.8 per cent of imports and 2 per cent of all export flows, as shown in Exhibit 57. When the loans which Standard Chartered underwrites and the letters of credit issued by other Ghanaian banks but confirmed by Standard Chartered branches outside Ghana are added to this, the total related imports figure increases by $95.7 million, making the bank’s share of Ghana’s total imports 3.4 per cent, and of total exports – 2.1 per cent. Although Standard Chartered’s total share of 2.3 per cent may seem small, it is important to note that not all trade is intermediated by banks.

74 The Social and Economic Impact of Standard Chartered in Africa Standard Chartered’s impact on Ghana Central Bank Ghana 2012 Central on importdata and export 61 75 The Social and Economic Impact of Standard Chartered in Africa Exhibit 58 seems to indicate that the majority of Standard that the majority of Standard indicate Exhibit 58 seems to other to Ghanaian exports are exports related Chartered trade the local for Although this is likely markets. African trade international true for this is not provided, finance trade accurate which but for which is much larger finance, other to exports The large known exactly. not flows are the from thus an artefact are countries African methodology. extrapolation

10/Conclusion

Standard Chartered uses its expertise and tailored products and services to help smaller African companies expand

76 The Social and Economic Impact of Standard Chartered in Africa Conclusions and recommendations

77 The Social and Economic Impact of Standard Chartered in Africa – 0.8 per cent Kenya – 4.6 per cent Zambia Nigeria – 5.5 per cent Ghana – 3.4 per cent i. ii. iii. iv. (0.1 per cent of the workforce). (0.1 per cent by added supported of the value half (56 per cent) Over in the comes Africa in Sub-Saharan Chartered Standard (26 per cent) about a quarter of household income, form tax as per cent) (18 and the remainder as profits revenues. in impact substantially varies Chartered’s Standard structure. their economic reflecting countries, different with many inter-sectoral complex is economically Kenya in the supply chain. job creation that promote linkages tend and companies complex less Nigeria is economically vertically integrated. be more to impact added and employment The value of financing the banking sector is where in markets is largest SMEs obtain. to is harder credit to and access developed less is a finance to access in Ghana and Zambia example, For and Nigeria. small firms than in Kenya for bigger hurdle impact has most financing SMEs when they However, productive more and become grow Standard Chartered is associated with $10.7 billion of with $10.7 is associated Chartered Standard GDP. Africa’s of Sub-Saharan added, or 1.2 per cent value in this report, studied is the GDP that the countries For financing is: with the banks’ associated with some 1.9 million jobs, or The bank is associated labour force. total Africa’s of Sub-Saharan 0.6 per cent the impact of loans underwrittenThese numbers exclude Chartered. by Standard the 2 exclude The numbers mentioned under points 1 and with the $1.6 billion deal impact economic associated The associated Chartered. underwrittenvalue by Standard impacteconomic of this underwriting is $1.6 billion in of GDP) and 206,000 jobs added (0.2 per cent value 4. 5. 6. The report quantifies Standard Chartered’s impact across impact across Chartered’s quantifies Standard The report The main findings are: Africa. Sub-Saharan 1.  2. 3. onclusion

This report assesses Standard Chartered’s significant social significant Chartered’s Standard assesses This report The bank Africa. impact on Sub-Saharan and economic supports employment, pays financial expertise, provides small both and helps and investment trade facilitates taxes, credit. by providing grow to businesses and large journey from map Africa’s of this report chapters The earlier more on demand from reliant economy a resource-driven destination. investment an attractive nations to developed intra-regional of Africa’s describes the growth The report the resources, beyond natural the diversification trade, of new mobile the spread of the middle class, expansion and political and macroeconomic technology, and telecoms confidence investor crucial for All of these are stabilisation. in the region. to contributor a significant has been Chartered Standard than a – more the many years over these developments in Sub-Saharan operated – that it has cases in most century in many has been valuable Its contribution markets. African and international local including through areas, different in a importance of great which are financial operations, highly capital-constrained. been that has traditionally region company, a manufacturing a loan to When the bank makes goods, and more produce the firm can example, for of its own a range from input needs more therefore goods their own demand for suppliers, who in turn increase every time it this virtuous circle and services. By repeating across adds value Chartered loan, Standard a new makes the region. contributions significant other Chartered’s Standard the of financial markets, included the deepening have and structures financial products of innovative introduction and the banking firms, consumers, governments, to a public good through The bank also provides community. many of its bankers, to and skills it provides the training and and businesses, institutions build other to whom leave programmes. investment its community through 10.1 C Conclusions and recommendations continued

10.2 Recommendations for Standard Chartered 3. In many African markets, Standard Chartered operates in the same areas as the international community’s bilateral We believe that the bank could, over time, make an even and multilateral development agencies. The bank already greater contribution to economic growth in Africa. Our collaborates with these organisations. It could provide specific recommendations are: further expertise to assist development agencies to leverage private capital and to improve the enabling 1. Standard Chartered has committed to increase funding environment for enterprise, for example by building on to SMEs globally by 45 per cent to $30 billion over the the extensive work the bank is already doing to finance next five years. The bank will also provide training to power and infrastructure. 5,000 companies. The bank has recently announced a reorganisation of its business, creating a new Commercial 4. Standard Chartered should further focus its community Banking client to improve the services and products investment activities to harness its core business and offered to medium-sized enterprises. The bank has an staff skills and experience, with more targeted support opportunity here to enhance financing of the value chain for SMEs. Standard Chartered has announced a in Africa. At present, it can be difficult for small suppliers commitment to empower a further 500,000 to large corporations to obtain financing against contracts disadvantaged girls by 2018 through Goal, the bank’s or accounts receivable. Standard Chartered could deploy sport-for-development programme that provides appropriate risk-assessment tools to provide this financial education and life skills training to girls aged financing to SMEs in Africa, while identifying institutional between 12 and 20. Delivering on this commitment, gaps in the regulatory environment that impede the using employee volunteering will provide much-needed roll-out of products to finance supply chains, working skills to young women who are critical to sustainable with government and regulatory authorities to economic development. overcome them. 5. Given the high levels of trust it enjoys among 2. Given the importance of economic complexity and stakeholders across Africa, Standard Chartered should inter-linkages between sectors, Standard Chartered continue to work closely with governments and should explore ways through which it can increase the regulators to improve the business environment to economic complexity of the countries in which it support and encourage investment (this could include operates. For example, can Standard Chartered help the creation of positive credit reference bureaux and overcome the need for vertical integration in Nigeria, effective commercial courts), innovation, and which results in scale disadvantages? Or can the bank entrepreneurship. Almost uniquely among private sector in Kenya encourage inter-linkages between agriculture companies, the bank has remained in its African markets and manufacturing, which are weaker than expected? through the region’s economic and political peaks and These are potentially very constructive areas for policy troughs, developing a wealth of knowledge and social debate with finance ministries, regulators and capital. It should use this experience to promote a international financial institutions. dynamic business climate. Within the bank itself, this should include its continued leadership in providing high-level skill training and the roll-out of new technologies into local financial markets.

78 The Social and Economic Impact of Standard Chartered in Africa Conclusions and recommendations 79 The Social and Economic Impact of Standard Chartered in Africa Since African countries will naturally wish to enter higher enter to wish will naturally countries African Since resources on natural than rely sectors rather value-added continue policymakers must streams, income future for Organisation Trade with World pursue negotiations to playing of a truly level the creation ensure members to currently These exporters exporters. African field for which economies, advanced from escalation tariff face value-added in high investment to acts as a disincentive activities. pursue value-addition governments Many the fully appreciate always but do not strategies, context. of the international importance explore increasingly investors as foreign Finally, give to opportunities policymakers will have in Africa, schemes. These incentive appropriate thought to greater without investment on attracting should be focused be damaging which can the bottom, to a race encouraging advantage firms at a competitive and put foreign fiscally Again, policymakers will need to competition. local over foreign playing fields for level create how to consider nations and within them so African across both investors benefits that these the real reaps that the continent bring. investors 4. 5. emarks for governments emarks for As these countries increase their trade with the rest of with the rest their trade As increase these countries international to exposed more they become the world, did not that Africa shocks. One reason economic of the global financial the banking failures experience exposed less generally its banks were crisis is because than those in debt and Greek mortgages American to Although its Europe. and Western States the United years, few the past over well performed have regulators and macroeconomic environment regulatory Africa’s oversee further develop to management will need to sophisticated and more financial institutions cross-border and services. financial products more globalise and become this, as regions to Related and consumers shocks, workers economic to exposed volatility and prices. in earnings greater to exposed be can Europe in Western openness economic The greater by the accompanied was War World the Second following that nets and deepening of social safety development it is public In Africa, volatility. despite workers supported to exposed those least words, – in other sector workers of the main beneficiaries volatility – who are economic of The design and reform regimes. safety-net existing will undoubtedly a globalising Africa in nets social safety on policy than important topic agendas more a become it is at present. primarily are economies that many African Given be attentive policymakers must exporters, commodity fuels and fossil materials if raw issues curse’ ‘resource to This requires growth. sustained be a boon for to are that regimes of resource the creation giving thought to and other the future funds for trust example, include, for is used resources from that income ensure mechanisms to and sustainably. productively

10.3 R in on multiple fronts progress social and economic Despite to yet are challenges significant countries, many African be overcome. 1. 2. 3. Appendix

A.1 Model description Outstanding loan amounts and related economic output The purpose of this study is to quantify the effects of In order to quantify the impact of Standard Chartered’s loan Standard Chartered’s operations in the African region, with portfolio for the entire year of 2012 the study focuses on a particular focus on its impact on Africa’s regional and the outstanding loan amounts of as 31 December 2012 international trade. In order to determine this impact, the assuming that that ‘photo’ of the portfolio is representative consultants will elaborate a Socio-Economic Impact for the entire year and the sectoral division of output Assessment (SEIA) model of the type that has already associated with Standard Chartered in 2012 as a whole. been developed for Standard Chartered in Ghana, Indonesia For example, if the bank made a $100 revolving loan with and Bangladesh. a duration of 30 days outstanding with a washing machine producer as of 31 December this producer might be able Our methodology is based on input-output modelling to use these funds to produce one washing machine in (first created by the Nobel Prize-winner Wassily Leontief), December. The economic model applied in this analysis, which combines the financial data of Standard Chartered’s however, uses annual output figures. Therefore the $100 Sub-Saharan Africa subsidiaries with the macroeconomic revolver will be associated with 12 washing machines of data of the region. In other words, the methodology uses annual output and this is the output used in the model. both micro- and macro-economic analysis and relies on Focusing on outstanding figures at one moment in time corporate financial as well as on official economic data, is far less data-intensive than analysing figures for each coupled with a national input-output table based on month but leads on a macro-level to directionally government statistics. correct estimates. There are several ways in which the bank creates socio- We can then trace the outputs supported by Standard economic impacts: Chartered finance throughout the economy by making use 1. Standard Chartered supports value added and of the input-output tables that we develop. These are employment directly through its own operations; based upon official economic data. The quantification relies on the so-called social accounting matrix (SAM) with which 2. Standard Chartered provides onshore term finance the ripple effects of the associated output can be calculated (long-term lending that supports capital expenditures) on sector level. The SAM describes the inter-linkages in an enabling local firms to invest, for example, in new economy, depicting how the output of one industry machinery, employees and, ultimately, to increase influences another where it serves as an input. For example, their output; the car industry requires steel, tyres, electricity, etc, to 3. Standard Chartered provides onshore short-term finance produce vehicles while the supplying industries require (working capital loans); various inputs to produce good/services they sell to the car industry. A SAM depicts those linkages and therefore 4. Standard Chartered supports trading companies by essentially makes one industry dependent on another, both providing funded and unfunded trade finance that helps as customer of outputs and as supplier of inputs. them to import required inputs and export their output; 5. Finally, as a branch of an international banking group, Standard Chartered mobilises international capital, or offshore financing, benefiting projects (CAPEX investments) and companies in sub-Saharan Africa. The economic impact of Standard Chartered and its clients is measured primarily in terms of value added (the sum of salaries, profits and tax payments) and full-time equivalent employment. These impacts come about either directly (i.e. created by the bank and its clients), indirectly (i.e. created by suppliers of Standard Chartered and its clients), induced and leveraged effects by households through their additional spending power based on income they have earned by working for all these firms and the effects from households that are able to financially leverage themselves using these incomes.

80 The Social and Economic Impact of Standard Chartered in Africa Funded versus unfunded trade finance Local versus international trade finance facilities The outputs related to funded and unfunded trade finance Depending on the local context, letters of credit issued products are estimated in the same way. Funded as well as by local banks to cover a trade transaction between, unfunded trade finance supports real economic transactions for example, Nigeria and China might not be accepted by the and hence should be assumed to have the same impact on counterparty. In this case Standard Chartered may be asked outputs and trade flows. For all funded products the related to add a confirmation on the local bank’s letter of credit. output can be estimated based on the collateral underlying In other words, Standard Chartered provides a letter of credit the outstanding loans. For non-funded products the related confirmation. The study will cover this effect by referring output is simply the value of the goods covered in letters of to a multiplier effect estimated by analysing net and gross credit, guarantees, etc. Further, outstanding trade finance will exposure to trade finance. For example, if the net exposure be distinguished by products related to import and export is $100 million and the gross exposure is $120 million, the transactions. Imports related to trade finance are determined $100 million will be the input to the model, however by using conversion factors indicating the amount of mentioning that a multiplier of 1.2 applies to the results. imported input a particular sector needs to produce its final output. These conversion factors are available for the Global Extrapolation The four individual deep-dive studies assessed serve as a basis Trade Analysis Project’s (GTAP’s) macroeconomic data. for the extrapolation to SCB’s impact in Sub-Saharan Africa. The related exports are calculated based on the share of Based on the average loans-to-related-impact relation as a sector’s output that is typically exported. This analysis is observed in the four countries, we obtained value-added and conducted on a country-by-country level taking national employment translation factors. Hereby we distinguish five differences in export shares into account. customer segments (Retail & SME, Commodity Traders & Term finance and working capital loans Agriculture, Local Corporates, Global Corporates and Financial Term finance and working capital loans are converted into Institutions), as well as eight economic sectors. This detailed firm output based on the production function of the bank’s approach allows estimating the broader economic impact of clients. That means that there will not be any differentiation $1 million given to, for example, an SME operating in agriculture in the allocation of impacts to these two types of finance. or the impact of a loan given to a local manufacturing Production functions depend on the clients’ capital corporation. Capital intensities, which determine the related structure. A production function describes a firm’s economic output to a large extent, vary between sectors and segments. output (P) as a function of its inputs, namely capital (K) and This approach enables quantifying the related output controlling labour (L): P = f(L,K). Although classic production functions for these differences. Finally, the translation factors are applied are written in terms of physical outputs, economic output to a breakdown of the loan books per economic sector and has been used to allow for different firms to be incorporated customer segment per country in which SCB is present. This more easily. L has been measured in terms of the full-time exercise has been executed repeatedly in order to obtain the equivalents (FTEs). Production functions consequently various breakdowns presented throughout the report. indicate the amount of capital required in various sectors to produce one additional unit of output (capital intensity of production). For SCB’s wholesale banking clients K has been A.2 Limitations of the approach defined as firm assets as of 31 December 2012. For SME clients this information is not readily available, so for those The major advantage of the methodology applied in this companies the report relies on publicly available information study is that it allows quantifying the wider (direct, indirect on fixed assets by industry and gross output figures by and induced) impacts arising from investing into various industry. Standard Chartered also provides finance to economic sectors, both directly and through financial financial institutions (FIs). To estimate the impact of this intermediaries (FIs) in terms of both associated value- finance the total amount provided is broken down into the added (or contribution to GDP growth) and jobs. It is a various economic sectors based on the average country rigorous academic method that is widely agreed upon and portfolio (for most countries available from the Central for which Wassily Leontief received the Nobel prize in 1973. Bank) and, just as for SMEs, publicly available assets and However, it is also important to point out the limitations gross output figures by industry have been applied to the of this methodology: FI portfolio companies. A full analysis in terms of sales and asset figures of all FI portfolio companies would have gone 1. Given that the analysis is conducted for a specific beyond the scope of this study. For retail finance we have moment in time, it does not take into account any assumed that 100 per cent of the loans provided have structural changes of the economy (for example, been spent. increased productivity);

The Social and Economic Impact of Standard Chartered in Africa 81 Appendix continued

2. Estimates are based on historical relations, while the A.3 Comparison with Ghana 2009 impact study methodology is based on the most recent (macro) economic data available; Steward Redqueen conducted a separate socio-economic impact study of Standard Chartered in Ghana in 2010, 3. Equity and debt are treated the same way; based on the bank’s performance in 2009. The total 4. Differentiation by size, and hence productivity, of firms onshore assets in 2009 were $287.6 million and the related within a sector is only made for direct Standard Chartered impact was $400 million and 155,700 jobs. Total on- clients; balance sheet onshore assets in 2012 were $515.4 million, local off-balance exposure is $81.5 million. This means 5. It does not take into account the effects of Standard that the local finance exposure in 2012 is 1.8 times the Chartered advisory services; exposure in 2009. In addition to the local finance, this 2012 6. Standard Chartered’s investments are treated as study also looks into $635.3 million of international finance investments from any other lender and it has been Standard Chartered provided to Ghana. Total related impact assumed that Standard Chartered’s financial support does in 2012 is $1,397 million and 283,000 jobs. While the not affect the relations of sectors within an economy. value added impact is very much in line (similar impact per $1 million of assets), significantly fewer jobs are supported. Structural changes could be brought about by increasing the productivity, for example by reducing unnecessary or The differences in the related job results by $1 million invested onerous business regulations or improving power supply or are largely caused by revised GDP figures as published by the transport infrastructure, allowing many firms to be more Statistical Office of Ghana utilised as input to the model. As productive. Structural changes could also be brought data are scarce, local authorities had calculated overall GDP for about by increasing the skill level of workers: In this study, 2009 based on 1993 ‘base-year’ information; in 2010 this productivity in Standard Chartered’s direct real-sector base year became 2006. This led to a sudden growth of the clients would be captured, but for example productivity Ghanaian economy of 60 per cent. As a result, the labour improvements of their suppliers would not be captured. productivity in the 2012 study is significantly higher than the one in the 2009 study, meaning that relatively fewer workers The proportion of the firm’s revenues that can then be are required to produce the same amount of output. ‘attributed’ to the outstanding finance is equal to the share or proportion of newly provided financing out of the borrower’s The same micro-level client information has been used by total capital. This means that the various types of financing both studies. Client level information obtained in 2009 provided to the recipient (for example, debt, equity or has also served as an input to the 2013 study but total instruments such as guarantees) have been treated in the outstanding loan amounts have been updated to December same way in terms of their impact on the sector’s capital 2012 instead of December 2009. structure, and thus its ability to generate more output. This is The results estimated based on the inputs mentioned above likely to underestimate the impact of equity financing, as this show that in the more recent study $1 million of finance is generally assumed to allow companies to raise additional supports about half as many jobs as was the case in 2010. capital. This particular limitation of input-output modelling will This is mainly due to large productivity gains, among other therefore mean results presented are somewhat conservative. factors caused by the new statistics made available by local Similarly, the approach taken in this study does not allow agencies, in labour-intensive sectors such as agriculture, differentiation between long- and short-term finance provided. wholesale and retail as well as public services. As the model relies on sector average productivity rates, differentiating the impact of investing in different sizes of company (for example, large corporates, which are generally more productive, compared with investing in smaller SMEs) cannot be addressed. The same applies to direct financing versus indirect financing via FIs, where company size is one of the factors explaining the different extent of related impacts. Standard Chartered’s advisory services can help improve the investment climate and increase access to finance and infrastructure. We have not tried to capture these effects quantitatively, but clearly they can be significant and we provide some qualitative descriptions of such projects.

82 The Social and Economic Impact of Standard Chartered in Africa Table A.1: Total impact associated with $1 million provided to the various client segments

Economy-wide value added Economy-wide employment Client segment 2013 2010 2013 2010 Retail Banking 0.9 0.5 222 223 Small Medium Enterprises (SME) 3.8 3.8 862 1,715 Local Corporates 1.1 1.2 247 483 Commodity Traders & Agriculture 1.0 1.3 187 570 Global Corporates 1.0 1.0 281 544 Weighted Average 1.2 1.1 278 509

Table A.2: Total impact associated with $1 million provided to the various economic sectors

Economy-wide value added Economy-wide employment Client segment 2013 2010 2013 2010 Agriculture 0.9 6.5 349 6,831 Mining & Quarrying 1.0 1.0 114 40 Manufacturing 1.2 0.8 361 261 Utilities 0.6 1.3 112 79 Construction 1.1 1.3 177 79 Services 1.5 2.2 249 284 Transport & Communications 1.4 1.0 217 321 Wholesale & Retail 1.2 1.7 208 1,456 Weighted Average 1.2 2.0 278 1,298

The Social and Economic Impact of Standard Chartered in Africa 83 A.4 Economic sector classification of model applied Paper products, publishing Petroleum, coal products Agriculture Chemical, rubber, plastic products Horticulture Mineral products Paddy rice Non-metallic minerals Wheat Iron and steel Other grains Non-ferrous metal Vegetables, fruit, nuts Fabricated metal products Oil seeds Motor vehicles and parts Sugar cane, sugar beet Transport equipment Plant-based fibres Electronic equipment Other crops Other machinery and equipment Cattle Other manufacturing Other animal products Utilities & Construction Raw milk Electricity Wool, silk-worm cocoons Gas manufacture, distribution Mining & Extraction Water Forestry Construction Fishing Wholesale & Retail Coal All retail sales Oil Repairs of motor vehicles and personal and household goods Gas Retail sale of automotive fuel Other mining Wholesale trade and commission trade Manufacturing Hotels and restaurants Cattle meat Transport & Communication (Transport/ Other meat Communication) Vegetable oils and fats Transport Dairy products Water transport Processed rice Air transport Sugar Communication Food products Beverages and tobacco products Services (Financial/Public/Social Services) Textiles Other financial intermediation Wearing apparel Insurance Leather products Other business services Wood products Recreation and other services Other governmental services Dwellings

84 The Social and Economic Impact of Standard Chartered in Africa About the report and acknowledgements

Standard Chartered commissioned this report to gain an understanding of its impact in Sub-Saharan Africa. The bank aims to contribute to social and economic development in the more than 68 markets where it operates. It hopes that the report’s findings will help to inform its future strategy. The report was produced between June and December 2013. It draws mainly on official statistics from the central banks and national statistics offices in Ghana, Nigeria, Kenya, Zambia, data from the Global Trade Analysis Project (GTAP) as well as corporate data from Standard Chartered in Sub-Saharan Africa. The authors wish to thank the management of Standard Chartered for its support of this project, as well as the customers and other stakeholders of the bank who gave their time during interviews. Special recognition goes to Marianne Mwaniki, Head of Social and Economic Impact at Standard Chartered for the facilitation and management of the overall project. We would also like to appreciate the support from Informativity and KnowledgeSource on the design of the interactive visual summaries and mobile application. The authors are solely responsible for the contents of this report and it should not be attributed to other organisations to which the authors may be affiliated. It does not express the views of Standard Chartered Plc.

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